Market Coverage: Thursday January 13 Yahoo Finance

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U.S. stocks turned lower Thursday as investors considered a fresh read on weekly unemployment claims and wholesale price inflation out of Washington. Tech stock underperformed, and the Nasdaq dropped more than 1%.

The Labor Department’s weekly jobless claims report showed an unexpected rise in first-time unemployment filings for last week, with these increasing to 230,000. Still, this remained near pre-pandemic levels, and continuing jobless claims improved to their lowest level since 1973. Meanwhile, the Bureau of Labor Statistics’ December producer price index (PPI) showed a 9.7% year-over-year increase in wholesale prices for the end of 2021, marking the biggest jump on record in data going back to 2010.

“The inflation picture obviously is something that people are trying to understand — the concept of PPI and the fact that we’re getting … numbers that we haven’t seen in quite some time,” Omar Aguilar, Charles Schwab Asset Management CEO, told Yahoo Finance. “The labor market seems to continue to be very tight and very strong, and I think investors are trying to understand what the implications might be for the reaction of the central bank.

For many economists, the inflation prints suggest the central bank will move more quickly than previously telegraphed to raise interest rates and tighten financial conditions.

“Persistent high inflation rates together with the recent strong labor market data reinforce the hawkish narrative provided by the Fed,” Christian Scherrmann, DWS Group U.S. economist, said in an email. “Looking ahead, Omicron looks set to dictate the fate of the economy in January and maybe in February, but current indications on how the new variant plays out suggest that the Fed will remain on track to reduce its accommodative monetary policy, most likely as early as in March this year, by hiking rates for the first time since December 2018.”

Investors also continued to digest a red-hot print on inflation in consumer prices from earlier this week. This showed another decades-high rate of price increases, one day after Federal Reserve Chair Jerome Powell indicated in his renomination testimony that the central bank would intervene as needed to ease rising prices. The Bureau of Labor Statistics’ December Consumer Price Index (CPI) showed the cost of goods rose at a 7.0% year-over-year rate at the end of 2022 to mark the highest levels in four decades.

“I think the 7% print was largely priced in to the equity markets,” Comerica Wealth Management chief investment officer John Lynch told Yahoo Finance Live, though adding that we have “a little more to go” on CPI before it peaks.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, shared a similar view that the rate of price increases could ease starting mid-this year, but CPI may reach 7.2% in January and February before it takes a subsides.

“The run of big increases is over, and it will start to fall in March,” he wrote in a note, anticipating that September could see a print of 4.5%.

To close out the week, banks are scheduled to report fourth quarter results on Friday as earnings season kicks off. The S&P 500 Financials sector exchange-trade fund XLF set a fresh record intraday high again on Wednesday, marking its fourth record in the eight trading days so far in 2022 as investors gear up for quarterly reports from BlackRock (BLK), Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC).

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