# Stocks, dollar little changed as inflation data sends mixed signals
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-12-09
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Dollar and Wall Street Trade Steady Amid Inflation Concerns
Meta Description: Discover how conflicting reaction to US producer prices is impacting the dollar and Wall Street stocks in light of the latest data.
URL: https://financedigest.com/stocks-dollar-little-changed-as-inflation-data-sends-mixed-signalshtml

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By Herbert Lash and Carolyn Cohn

NEW YORK/LONDON (Reuters) – The dollar and Wall Street stocks traded little changed on Friday after data on U.S. producer prices drove conflicting reactions, stirring hope that [inflation is moderating while also raising fears the Federal Reserve will need](https://www.financedigest.com/bank-of-england-still-needs-to-see-the-job-through-on-inflation-pill.html "Bank of England still needs to ‘see the job through’ on inflation: Pill") to keep interest rates higher for longer.

The producer price index (PPI) for [final demand rose 0.3% last month and increased 7.4% in the 12 months through November](https://www.financedigest.com/uk-economy-finally-bigger-than-before-pandemic-in-november.html "UK economy finally bigger than before pandemic in November"), while the PPI for October was revised up to 0.3% from 0.2% as previously reported, the U.S. Labor Department said.

Economists polled by Reuters had forecast monthly PPI [climbing 0.2% and rising](https://www.financedigest.com/uk-card-fraud-losses-climbed-18-percent-in-2015-largest-rise-in-europe.html "UK CARD FRAUD LOSSES CLIMBED 18 PERCENT IN 2015, LARGEST RISE IN EUROPE") 7.2% year-on-year.

While the [data showed a moderating pace of inflation](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle") for the last 12 months, the monthly rise fueled concerns that next week’s report on the consumer price index may indicate hotter-than-expected inflation and lead the Fed to not cut rates as soon as many anticipate.

[Fed policymakers are expected to raise rates](https://www.financedigest.com/fed-rates-up-boe-up-ecb-up-stocks-up.html "Fed rates up, BoE up, ECB up, stocks up") by 50 basis points next Wednesday, in their last policy meeting of 2022, to a range of 4.25% to 4.50%, which would mark a slower pace of rate increases.

The markets are overly optimistic that at some point between June and December ( [next year](https://www.financedigest.com/1-in-10-workers-considering-a-career-change-in-the-next-year.html "1 in 10 workers considering a career change in the next year")) the Fed is going to be willing to cut,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.

Today’s [data shows that inflation](https://www.financedigest.com/oil-jumps-on-lower-than-expected-us-inflation-data.html "Oil jumps on lower-than-expected US inflation data") is coming down, but it’s lingering and is stickier than most assume,” he said. The [Fed is going to have to raise interest rates](https://www.financedigest.com/wage-data-dents-dollar-recovery-before-fed-rate-decision.html "Wage data dents dollar recovery before Fed rate decision") a little bit more.

Futures show the [terminal rate](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") peaking at 4.948% next May, and then declining to 4.488% by December 2023.

U.S. stocks earlier pared losses after the University of Michigan’s preliminary reading on consumer [sentiment showed an improvement to 59.1 in December from 56.8 the prior month](https://www.financedigest.com/6-months-to-go-until-brexit-and-investor-sentiment-remains-bold.html "6 months to go until Brexit and investor sentiment remains bold").

But enthusiasm over the UMich surveys soon waned, and stocks on Wall Street [traded little changed](https://www.financedigest.com/data-centres-and-the-changing-financial-trading-landscape.html "Data centres and the changing financial trading landscape"). The Dow Jones Industrial Average fell 0.25%, while the S&P 500 lost 0.06% and the Nasdaq Composite added 0.11%.

The Fed has made it abundantly clear that it’s not in the business of repeating mistakes of the past,” Johan Grahn, head of ETFs at Allianz Investment Management in Minneapolis, said in a reference to halting [rate hikes](https://www.financedigest.com/dollar-firms-after-u-s-labor-data-suggests-more-rate-hikes.html "Dollar firms after U.S. labor data suggests more rate hikes") too soon.

Time just [needs to run its course before we know](https://www.financedigest.com/g20-summit-what-you-need-to-know-now.html "G20 Summit: What you need to know now") we’re on the right path toward the Fed’s goal, a softish landing that’s been talked about,” Grahn said. It will take [time for inflation](https://www.financedigest.com/love-in-a-time-of-inflation-how-much-will-valentines-day-set-you-back.html "Love in a time of inflation: how much will Valentine’s Day set you back?") to work its way down.

MSCI’s gauge of [stocks across the globe gained](https://www.financedigest.com/stocks-mixed-dollar-gains-after-robust-inflation-jobs-data.html "Stocks mixed, dollar gains after robust inflation, jobs data") 0.29%, and in Europe the broad STOXX 600 index closed up 0.84%. But recession worries dragged the pan-European index to a [weekly loss](https://www.financedigest.com/dollar-retreats-headed-for-biggest-weekly-loss-since-mid-january-bitcoin-down.html "Dollar retreats, headed for biggest weekly loss since mid-January; bitcoin down") after a seven-week rally.

Treasury yields mostly rose, suggesting [higher rates](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") ahead for the long term, with the benchmarket 10-year yield up 6.9 basis points to 3.562%.

The two-year note, which often moves in step with [rate expectations](https://www.financedigest.com/ecbs-makhlouf-expects-50-bps-rate-hike-in-december.html "ECB’s Makhlouf expects 50 bps rate hike in December"), rose 0.9 basis points to 4.321%.

[Market prices also showed a declining trend in breakeven inflation](https://www.financedigest.com/hungarys-booming-wedding-market-doused-by-soaring-inflation.html "Hungary’s booming wedding market doused by soaring inflation") rates for U.S. Treasury inflation-protected securities (TIPS), seen as a good [leading indicator for future prices](https://www.financedigest.com/liverpool-shines-as-one-of-uks-leading-ladies-for-house-price-growth.html "Liverpool shines as one of UK’s leading ladies for house price growth").

The two-year breakeven rate fell to 2.3372% from 2.407% late Thursday, suggesting that investors [expect inflation](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected") to average almost 2.34% over the next two years. The yield curve measuring the gap between yields on two- and 10-year notes, a recession harbinger, lessened too, at -76.1 basis points.

The [dollar was broadly weaker](https://www.financedigest.com/deutsche-bank-equity-bear-market-rally-will-stretch-into-2023-dollar-weaker.html "Deutsche Bank: Equity bear market rally will stretch into 2023, dollar weaker") overnight, but reversed some of its losses after the PPI report.

The euro fell 0.1% to $1.0545, and the [yen strengthened 0.16% to 136.43 per dollar](https://www.financedigest.com/aussie-dollar-firm-as-bonds-tumble-yen-looks-past-boj.html "Aussie dollar firm as bonds tumble, yen looks past BOJ").

The [world’s largest investment](https://www.financedigest.com/breaking-the-stigma-men-and-mental-health-in-the-world-of-investments.html "Breaking the Stigma: Men and Mental Health in the World of Investments") banks expect global economic growth to slow further in 2023 following a year roiled by the Ukraine conflict and soaring inflation, which triggered one of the fastest monetary policy tightening cycles in recent times.

[Investors sold stocks](https://www.financedigest.com/influx-of-one-time-investors-swapping-stocks-for-bricks-and-mortar-reports-agency.html "Influx of ‘one-time’ investors swapping stocks for bricks and mortar reports agency") and bought gold in the week to Wednesday, withdrawing $5.7 billion from equity funds, BofA Global Research said, a week of “small, joyless flows.

In addition to the Fed, the [European Central Bank and the Bank of England are also set to announce interest rate hikes next week as policymakers continue to put the brakes on growth to curb inflation](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook").

Euro [zone banks are set to repay early another 447.5 billion euros in multi-year loans from the ECB](https://www.financedigest.com/euro-zone-consumers-more-optimistic-on-inflation-ecb-survey-shows.html "Euro zone consumers more optimistic on inflation, ECB survey shows"), bringing the total reduction of outstanding loans to nearly 800 billion euros in just a few weeks, the ECB said.

Oil prices rose but both benchmarks were [set for a weekly](https://www.financedigest.com/londons-ftse-100-edges-higher-set-for-fourth-weekly-gain.html "London’s FTSE 100 edges higher, set for fourth weekly gain") loss as worries over a weak economic outlook in China, Europe and the United States weighed on oil demand.

U.S. crude fell 44 cents to settle at $71.02 a barrel.

U.S. gold [futures settled 0.5% higher](https://www.financedigest.com/investors-often-ignore-capital-gains-tax-but-should-consider-selling-now-to-avoid-a-higher-future-tax.html "Investors often ignore capital gains tax, but should consider selling now to avoid a higher future tax") at $1,810.70 an ounce.

(Reporting by Herbert Lash; Additional reporting by Carolyn Cohn in London, Stella Qiu in Sydney; Editing by Chizu Nomiyama, Mark Potter and Leslie Adler)


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