Stock market today: Stocks rally, then fall, amid 40-year high CPI

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Today’s highly anticipated March inflation figures showed prices soaring at their fastest pace in more than four decades. And yet, the report seemed poised to drive stocks higher…until it didn’t.

The Labor Department said Tuesday that the March consumer price index (CPI) rose 8.5% year over year – the fastest rate since December 2021 and ahead of higher expectations. wide 8.4%, although below Kiplinger’s forecast – and 1.2% on a month. -month.

There was an ounce of good news in the core CPI reading, which excludes food and energy prices. Core prices rose 6.5% year-on-year, but only 0.3% month-on-month, below forecast 0.3% and down from at the February rate of 0.5%.

“Inflation optimists may take this as a sign that inflation is peaking, or has already peaked and may now begin to decline,” says Andy Sparks, head of portfolio management research at the MSCI index provider.

These optimists led the major indices to significant gains just after the opening bell, but the energy of the bulls ran out early and selling dominated the rest of the day as Wall Street absorbed more of the price numbers. to consumption.

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“Underlying inflation momentum still looks too strong,” said Bill Adams, chief economist at Comerica Bank. “Most of this is the spike in the costs of rents and the equivalent rent of the owners’ primary residence. These components of the CPI are more sticky than other consumer prices; they have risen at the fastest rate in 20 years in March, and they are accelerating.”

Adams adds that housing costs in the consumer price index tend to track home price indexes such as Case-Shiller and FHFA with a lag of between six and 18 months.

“It will continue to be an engine of high inflation through 2023,” he said.

Energy values (+1.7%) jumped, mainly due to a boom U.S. crude oil futureswhich ended up 6.7% at $100.60 a barrel after Shanghai eased some of its COVID-related lockdowns.

But the rest of the market let early gains slip away. the Dow Jones Industrial Average (-0.3% to 34,220), S&P500 (-0.3% to 4,397) and Nasdaq Compound (-0.3% to 13,371) all ended Tuesday’s session with modest declines.

Other news on the stock market today:

  • Small cap Russell 2000 managed to finish 0.3% in the green, at 1,986.
  • Gold Futures Contracts climbed 1.4% to settle at $1,976.10 an ounce, marking their fourth consecutive gain.
  • Bitcoin dipped below the $40,000 mark, down 1.8% to $39,324.96. (Bitcoin trades 24 hours a day; prices shown here are as of 4 p.m.)
  • CarMax (KMX) saw a notable decline today, dropping 9.5% following the used car maker’s earnings report. In the fourth quarter, KMX posted revenue of $7.7 billion, up 49% year-over-year and more than analysts expected. But CarMax’s earnings of 98 cents a share were 22.8% lower than the year-ago period and below the Wall Street consensus estimate. “We believe a number of macro factors weighed on our fourth quarter unit sales performance, including declining consumer confidence, the omicron-fueled surge in COVID cases, vehicle affordability and the overlap of stimulus benefits paid during the prior year period,” CarMax CEO Bill Nash said in a statement.
  • Several energy stocks rose along with oil prices today. Marathon Oil (MRO+4.2%), Devon Energy (DVN, +3.7%) and EOG Resources (EOG, +2.7%) were among the biggest advances of the day.

Continue to hedge against inflation

So the name of the game remains defence, with strategists continuing to suggest inflation protection until economic data indicates otherwise.

Gargi Chaudhuri, head of investment strategy, Americas, for ETF provider iShares, said his firm favors “a diversified, multi-asset approach to navigate higher prices.”

First, on equities, “companies with pricing power, strong balance sheets and healthy profit margins, such as those in the tech and healthcare sectors, should do well as the inflation remains above average,” she said. You can start your search among our top tech stocks and healthcare picks for the year, both of which feature a number of highly regarded blue chips.

“As for bonds,” Chaudhuri continues, “we like short-term, inflation-protected Treasuries and credit, which should benefit from sticky inflation and the Federal Reserve’s efforts to rein in inflation. inflation by raising rates.”

While dedicated investors may seek out individual debt issues, most of us typically get our fixed income exposure through bond mutual funds and bond exchange-traded funds (ETFs).

On both fronts, our suggestions mirror Chaudhuri’s, with most of our recommendations designed to counter the effects of impending inflation. Even better, our bond ETF picks can give you that kind of protection for a relative song. Read on as we highlight five fixed income ETFs that also offer low fees.

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