Nasdaq Composite (^IXIC 2.45%) Investor relief after new economic data showed inflation easing has also led to a fall in U.S. Treasury yields, which rose about 2%. Dow Jones Industrial Average (^DJI 1.65%) Over 600 points.
Many artificial intelligence (AI) stocks rose on this news. Semiconductor company Micron Technology (MU 5.99%) As of 12:12 p.m. ET, shares were trading 5.7% higher. Meanwhile, AI software company BigBear.ai (BBAI 6.60%) and C3.ai (A.I. 2.69%) Prices rose nearly 5% and 3%, respectively.
The market breathes a sigh of relief
Stocks began rising yesterday after the December Producer Price Index (PPI) report rose less than expected, suggesting that inflation remains on a downward trend. The Consumer Price Index (CPI) was the main focus this morning, and it did not disappoint.
Consumer prices in December rose 0.4% from the previous month, slightly higher than expected. However, core CPI, which excludes more volatile food and gas prices, rose by just 0.2%, slightly less than expected, suggesting once again that price pressures may be starting to ease. CPI rose 2.9% year-on-year, in line with expectations. The yield on the 10-year U.S. Treasury note fell about 12 basis points to 4.67%, after hitting high levels in recent weeks.
This report looks good. That’s because most of the increase comes from a 2.6% rise in energy prices, much higher than what we’ve experienced in the past few months. On the other hand, housing, which accounts for the most weight in the consumer price index, continued to show improvement as prices eased.
“Today’s CPI may make the Fed a little more dovish,” said Ellen, chief economic strategist at Morgan Stanley Wealth Management. “While the forecast for a pause in the second half of this month remains unchanged, there is a possibility that the Fed may raise interest rates. “That will be suppressed to some extent,” he said. Zentner told CNBC. “And judging by the market’s initial reaction, investors appear to be feeling a sense of relief after months of solid inflation.”
In other good news, major banks reported strong results this morning, showing that the economy is strong. Traders betting on what the Fed will do with interest rates this year remain concerned about inflation, but the likelihood of multiple rate cuts this year has increased, although most still think it will be just one. There is.
The economic situation has improved, but we are not out of the woods yet.
Today’s inflation report paints a rosy picture. It makes sense for investors to buy this news today, as inflation continues to trend in the right direction, the job market is strong, and an expanding economy could legitimately push yields higher. Of course, the situation is unstable and I think this situation may continue in the short term. Inflation remains above the Fed’s recommended 2% target, and one bad report could cast doubt on the country’s central bank’s belief that it has conquered inflation.
I didn’t see much company-specific news today. BigBear.ai and C3.ai are positioned as smaller versions of Palantir Technologies and have great potential. However, given that they are not yet profitable and have risen significantly over the past few years, I would like to keep my position small until their trajectory becomes clearer.
I would rather buy Micron. The company has a strong position in the memory chip market, which is critical to the AI ecosystem. The stock is trading cheaper than many AI stocks, trading at less than 15 times forward earnings.
Bram Berkowitz has no position in any stocks mentioned. The Motley Fool has a position in and recommends Palantir Technologies. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.
