Markets are rallying in the face of bad news, pushing stocks up across the board. Today brought the release of the latest Consumer Price Index (CPI) report. The report revealed that while overall inflation has slightly cooled, core prices remain high across many sectors, increasing 8.2% from the previous year. This demonstrates a slight decline from where they stood in recent months, but it still comes in above the 8.1% that economists predicted. Despite the dip that markets took this morning, they have demonstrated an impressive ability to shake off this negative momentum. While investors weigh crucial macroeconomic factors, every major index has pulled back into the green. However, for anyone wondering, “why are stocks up today?” a deeper dive into this morning’s events is necessary.
The Factors Pushing Stocks Up Today
The question of why are stocks up today can be traced back to positive market momentum. Until very recently, stocks were down across many sectors on news of the CPI report. But even rising inflation sometimes fails to overpower broad financial markets when Wall Street is able to shake off negative macroeconomics headwinds. That seems to be what we’re seeing today.
As InvestorPlace writer William White reports, many high-growth tech stocks plunged this morning. However, in the past hour, almost every name he cited has started rising, including Meta Platforms (NASDAQ:META) and Apple (NASDAQ:AAPL). A better measure of the market’s strength are the broad indexes, though, and all three are trending upward. The Dow Jones Industrial Average is up 2% for the day while the S&P 500 is just behind it. The Nasdaq Composite is up 1.5%, and all three indexes look primed to keep rising.
Another positive indicator for investors today is the recent rise in oil prices. Reuters reports that low levels of diesel inventory have pushed prices up by $1 today as companies prepare for the coming winter. Both Brent and U.S. crude oil futures have gained 1.3% after previously declining. This is excellent news for companies like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), which have been rising steadily all day.
Rate Hikes Ahead
What does all this mean for investors? Another rate hike from the Federal Reserve is very likely following the CPI report’s inflationary findings. While the next hike would come in November, it likely won’t stop there. According to senior economist Michael Pearce of Capital Economics:
“The stronger than expected 0.4% rise in consumer prices in September, driven yet again by a stronger increase in core prices, nails on a 75bp rate hike at the November meeting and, in contrast to the Fed minutes released yesterday, suggests that the Fed may need to continue raising rates at that pace in December and perhaps beyond too.”
This is in line with a recent prediction from InvestorPlace contributor Chris MacDonald. He noted that while gasoline prices have come down, overall inflation has been rising recently. For that reason, MacDonald warned investors not to expect a Fed pivot and instead to be prepared for further rate hikes. The data presented in the CPI report today strongly supports his argument, as it revealed that inflation isn’t subsiding enough for the Fed to consider pivoting.
While the recent rally has pushed stocks up today, plenty remains uncertain. If further rate hikes are implemented, and they likely will be, it will be problematic for growth stocks. But as we saw today, markets have the power to rally above these negative forces.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
