U.S. stocks spiked on Thursday as the CPI report boosted traders’ hopes that the Federal Reserve will continue its rate-cutting campaign this year. The Dow was up by almost 700 points in morning trading, while the S&P rose by 1.69 percent and the Nasdaq Composite was higher by 2 percent.
The closely watched core measurement of the Consumer Price Index slowed for the first time in months, according to recent data released by the Bureau of Labor Statistics. That reading, coupled with some better-than-expected wholesale inflation data received on Tuesday, spurred optimism in the markets.
CPI measures price changes across commonly purchased goods and services
Overall, the CPI did increase more than anticipated, rising 0.4 percent from November and jumping 0.2 percentage points to an annual rate of 2.9 percent. However, the monthly gain was largely driven by gas and food prices.
Energy prices, particularly gas and fuel costs, accounted for 40 percent of the overall monthly increase. Food prices also remained elevated as key staples such as meat and eggs continued to face pressures from weather and disease, respectively.
Core CPI gauge shows slow growth
Food and gas are two of the most visible and frequent ways that consumers encounter inflation. In the context of inflation measures, energy and food are two of the most volatile categories and can exhibit wild swings because of factors considered one-time in nature.
Excluding energy and food, the closely watched core CPI gauge slowed for the first time in months, rising just 0.2 percent from November and easing to 3.2 percent after staying stuck at 3.3 percent since September 2024.
Final CPI reading for 2024 marks a transition
Wednesday’s report marked the final CPI reading for 2024 and the last before President Joe Biden hands the keys over to President-elect Donald Trump.
While the causes of this recent bout of inflation were multifaceted and largely related to the Covid-19 pandemic and its fallout, the sharp rise in prices hit Americans hard and proved to be a critical factor at the ballot box. Prices of everyday items are 21 percent higher than they were in 2021. (Over a typical four-year period, prices tend to rise just under 10 percent, BLS data shows). Wages have risen faster than inflation for 20 months, the latest BLS data shows; however, they remain below where they were four years ago.
Path to normal inflation rates remains bumpyÂ
Inflation has slowed significantly since topping out at 9.1 percent in June 2022. However, the return to more typical rates of inflation was expected to be highly bumpy, and that choppiness was on full display in 2024.
The CPI started this past year at 3.1 percent, jutted higher in March — an increase feared as a reacceleration — kept interest rate cuts off the table but ultimately was short-lived. Consumer price inflation slowed as low as 2.4 percent in September, but as the past three months have shown, the path back to normal isn’t smooth.
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