S&P500 Jumps to a Record Despite Inflation Hitting a 39-Year High

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Key Takeaways

• S&P500 index gained 3.8% last week after a Friday boost took it to a record high
• US inflation hits a 39-year high as November’s consumer price report shows a 6.8% increase

What’s on Focus in the Markets?

Wall Street stocks enjoyed strong upside momentum Friday as all three major indexes were boosted to finish the week in the green. After a few choppy trading sessions, an inflation report on Friday was largely responsible for the single-day rally.

More precisely, the broad-based S&P500 index closed at a record territory after investors quickly digested November’s US inflation reading. This said, the blue-chip index gained 1% on Friday and logged a weekly gain of 3.8%. As a result, the S&P500 eclipsed a previous record set about three weeks ago.

The other two benchmarks, the Dow Jones Industrial Average and the Nasdaq Composite also advanced on Friday. The tech-heavy index finished the week higher by 3.6% as technology stocks rallied. Also, the 30-stock Dow Jones rallied roughly 4% over the past week.

What’s New Around the Markets?

The US Labor Department revealed on Friday US inflation reached a 39-year high in November, underpinned by strong consumer demand. In other words, the consumer-price index, a gauge for prices of goods and services, jumped 6.8% last month, compared with a year ago. This was the largest annual increase since June 1982.

Surging consumer prices have posed major challenges before the US Federal Reserve. In more detail, for months, the US central bank has been saying inflation is transitory. A couple of weeks ago, however, Chair Jerome Powell officially “retired” the word transitory in describing inflation.

Now, Mr. Powell and Fed officials must decide how to deal with the thorny, and sticky, inflation pressures. On that front, the Federal Reserve is having its final meeting of the year this week.

The Fed’s Final Meeting of 2022 Happens This Week

During the two-day meeting, slated for Tuesday and Wednesday, policymakers at the Fed could announce a faster monetary support reduction. In practice, this would mean the Fed’s bond purchases could end earlier than anticipated.

Presently, the central bank is withdrawing its support by $15 billion a month. With that pace, the asset-purchase program of $120 billion per month will end by mid-2022.

The swifter pace of withdrawing, or tapering, the asset purchases is already expected by investors. Further, the latest inflation print could put additional weight on the matter and force the Fed to act.

What’s the Latest News on Bitcoin?

Meanwhile, cryptocurrency markets traded modestly higher over the weekend. After a slight dip on Saturday, bitcoin ticked higher by about 3% on Sunday to reach levels near $50,000.

The price of the original cryptocurrency has been in a steady downfall since it reached a record high of $69,000 in early November. Still, over the past couple of weeks, buyers and sellers have kept the price at an inflection point, waiting for the next catalyst.

Cryptocurrency traders remain confident in the bright prospects of digital assets. In fact, many of them are excitedly buying the dip as they expect new heights for major tokens. Currently, the price of bitcoin hovers near $50,000 per token.