Early trading pointed to another positive session on Wall Street on Wednesday, while there was some volatility after the release of the latest inflation figures, stocks had come off their session lows, with all the main indices having pivoted into the green.
At 1515 GMT, the Dow Jones Industrial Average and the S&P 500 were up 0.01% and 0.11%, while the Nasdaq had gained 0.43%.
Wednesday's hotly awaited CPI report revealed that the cost of living in the US turned out to have held steady last month, buoyed by unusually large increases in clothing and medical care prices, with those for the former rising at their quickest pace since 1990.
Consumer prices edged past economists' forecasts, despite much ballyhooed revisions to the government's seasonal adjustment factors which had been expected to contribute to a small decline in the rate of advance in prices.
The rate of gains in headline consumer prices was at 2.1% year-on-year in January, according to the Bureau of Labor Statistics (consensus: 2.0%), unchanged from the month before, while at the 'core' level CPI came in at 1.8% (consensus: 1.7%), which was also the same as in the month before.
When compared to December, CPI was 0.5% higher, led by a higher cost of gasoline (5.7%), apparel (0.8%) and medical care services (0.6%).
As Jim Reid at Deutsche Bank pointed out in a research note sent to clients on 12 February, Thursday's print meant the CPI release extended a 25-year run of consistently coming in ahead of the consensus forecasts in January to 26.
Now, it remained to be seen whether CPI would also extend its 25-year streak of falling short during the following month, in February.
“The expectation is that there won't be any nasty upside surprises from CPI this time round. The year-on-year comparison should be quite flattering due to a high reading for January 2017.”
Also announced on Wednesday was the news that January retail sales fell 0.3%, well below the consensus forecast for growth of 0.2%, and sales excluding-autos and the control measure were both unchanged, but also well below consensus of 0.5% and 0.4% growth, respectively.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said, “We thought the consensus here was optimistic, given the softer Redbook chainstore sales numbers last month, but the core data are a bit weaker still than we expected. Note too that prior sales were revised down by a net 0.4%, which will subtract 0.2 percentage points from the headline Q4 GDP growth number.
“The numbers were hit by a bigger drop in auto sales than was implied by the manufacturers' volume numbers, and a 2.4% plunge in sales of building materials, mean-reverting after their post-hurricane leap. The core numbers were soft too, but at this point we're inclined to see that as a reaction to the unsustainably strong Q4 data. Total consumption jumped at a 3.8% rate in Q4, and that pace can't be sustained without a further big drop in the saving rate, which is already close to record lows.”
Traders will also be keeping a close eye on key technical levels, with the S&P 500 currently hovering around 2,670 – its 100-day simple moving average.
“A close above here opens up the possibility of a retest and break of resistance around 2,700, raising the probability of a resumption of the bull market. In contrast, a sell-off which sees the index break below 2,600 by the weekend would suggest that we're looking at something more damaging than a 10% correction,” said David Morrison, senior market strategist at GKFX.
In corporate news, Fossil Inc rocketed ahead as much as 65.05% after the watchmaker released better-than-expected earnings late on Tuesday.
Elsewhere, shares in Chipotle Mexican Grill saw a 14.83% bump after it said Brian Nicol, who was chief executive of Taco Bell, will be its new CEO from March and Hilton Worldwide Holdings, had crawled ahead 1.96% after its fourth-quarter profits outshone market expectations.
Molson Coors Brewing grew 4.40% and Dr Pepper Snapple lost 0.16%.
In FX news, Connor Campbell, financial analyst at SpreadEx, said, “After a truly wild, if not unprecedented, initial reaction the markets quickly calmed down following news of January's US inflation data.”
“Understandably the faster than forecast jump in inflation was catnip for the dollar, which soon found itself up half a percent against the pound and the euro. However, that growth proved to be short-lived, with investors seemingly deciding that today's data didn't change much, with the greenback slipping into the red against its currency rivals.”