Stocks ended higher today as investors weighed higher-than-expected inflation and corporate earnings.

The utilities and technology sectors led the gains, and the financial stocks were the biggest underperformer.

Strong earnings posted by European companies drove European markets higher and shifting investor sentiment to the positive.

The U.S. 10-year yield is lower in a risk-off sign and as the probability of an early rate hike by the Fed is priced in on high inflation readings.

The price of crude oil was flat at $80.53 and the spot price of gold was up $33.7 to $1,793.

Consumer prices rose 5.4 percent in September from a year ago, slightly higher than expectations.

However, excluding food and energy, inflation is only 4 percent.

Energy has been a driver of high inflation readings after the price dropped below zero in 2020 and has since risen to over $120 per barrel and then to its current level of $80.

Interestingly, a number of prices saw declines in September from the previous month: airline fares, used cars and apparel all saw monthly declines in inflation.

Used-car prices are likely to fall further as the chip shortage eases. The Fed has called this recent period of inflationary pressures “transitory” and expects the pressures to abate as base-effects wear off.

We think the risks to the economy remain skewed to the upside.

Consumer spending is fueling demand for goods and services, which is likely to continue for some time, in our view.

However, there are some risks that could throw a wrench into economic growth.

Persistently high inflation and energy costs could destroy demand, as consumers grapple with prices at the pump and utility bills.

Persistently above-trend inflation could also force the Fed to raise rates earlier than expected, a headwind for equities, but rate hikes still look to be a ways off, and the Fed is being patient with its theory of transitory inflation.

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