Equities were up slightly Wednesday, adding to Tuesday’s rally that ended a five-day slide for the S&P 500, which was driven by rising interest rates and worries over tighter Fed policy.
The 10-year Treasury yields ticked slightly lower to 1.73 percent after hitting 1.8 percent on Monday.
Elsewhere, global equity markets were mixed on the day while oil prices finished higher.
Technology stocks led the way on the back of moderating interest rates, reversing some of the underperformance in growth investments versus value in recent days.
All eyes were on inflation Wednesday, with the release of the December Consumer Price Index (CPI) revealing that headline inflation rose 7 percent year-over-year and the core measure (excluding food and energy) increased 5.5 percent, 40- and 30-year highs, respectively.
Higher auto and shelter prices were notable contributing factors.
While inflation continues to run hot, these figures were largely expected.
These figures will keep the Federal Reserve on track to wind down bond purchases and potentially hike rates in the coming months, though underlying trends in production, lower commodity prices, and progressing year-over-year comparisons will likely lead to lower inflation readings through 2022.
The effects of omicron are not fully reflected in December’s numbers, so temporary disruptions to the workforce, services and manufacturing activity could mean that inflation readings haven’t yet fully peaked.
Expect the broader trend to produce lower inflation, though it will likely settle in at a higher level than before the pandemic.
Also out today was the latest read on wages, showing that real average hourly wages (wage growth minus inflation) fell 2.4 percent over the past year.
This was down from recent months but still above the worst levels from April 2021.
Negative real wage growth is more a reflection of elevated inflation than a deterioration in the labor market.
In fact, labor shortages and strong economic activity have lifted nominal wage growth materially over the last year. The upshot is that as inflation begins to subside, it’s believed wages will remain sticky, meaning that real wage growth should trend higher from here.