Stocks rise as hot CPI data fails to unnerve investors

The dollar weakened and a gauge of global equity markets rose higher on Friday after data showed consumer prices rose as expected in November, easing concerns the US Federal Reserve would aggressively tighten monetary policy to combat inflation. 

Gold rose as rising inflation lifted its safe-haven appeal, while US Treasury yields were little changed in a sign some bond investors do not see interest rate hikes starting as early as next year's second quarter, as many equity investors do.

The US consumer price index increased 0.8 per cent last month after surging 0.9 per cent in October, while it accelerated 6.8 per cent on an annualized basis to mark the biggest year-on-year rise since June 1982.

The data failed to unnerve investors who closely watched the Labor Department report. The benchmark for US equities, the S&P 500 index, closed at its 67th record high of the year, according to S&P Global.

"This data suggests that the Fed will have to tighten monetary policy more aggressively than just a couple of months ago, and the market's acceptance of that is a little surprising to me," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

Brian Pietrangelo, managing director of Investment Strategy at Key Private Bank, said the Fed has raised interest rates four times since the 1990s and each time the market took the hikes well, with equities rising as rates move higher.

"We believe the market can handle rate increases as long as they're transparent and they're at the right pace," he said, noting he expects two or three interest rate hikes next year.

"The Fed's been pretty transparent, which is why you're seeing a positive move in the stock market today and not a lot of reaction in the bond market," Pietrangelo said.

MSCI's all-country world index rose 0.36 per cent, to post its biggest weekly gain, up 3.05 per cent, since early February. The broad STOXX Europe 600 index fell 0.30 per cent on concerns the Omicron Covid-19 variant could weaken the European recovery.

The Dow Jones Industrial Average rose 0.60 per cent, the S&P 500 gained 0.95 per cent and the Nasdaq Composite advanced 0.73 per cent.

Gains in information technology, led by Apple Inc, Microsoft Corp and Oracle Corp, pushed the S&P 500 and Nasdaq higher. But consumer staples were the second-biggest percentage gainer, up 2.0 per cent, suggesting investors were carefully assessing the Fed's next move.

The dollar slid as the forex market was positioned for a higher CPI reading, analysts said.

"The FX market has been extremely long US dollars for several months, so with this number coming in benign, we're almost out of events that could push the dollar materially higher before

year-end," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

The dollar index fell 0.157 per cent, with the euro up 0.19 per cent to $1.1314. The Japanese yen strengthened 0.02per cent versus the greenback at 113.43 per dollar.

The yield on 10-year US Treasury notes fell 0.2 basis points to 1.48 per cent.

Oil prices rose in their biggest weekly gain since late August, with market sentiment buoyed by easing concerns over the Omicron variant's impact on global economic growth and fuel demand.

Brent crude rose 73 cents to settle at $75.15 a barrel. US crude settled up 73 cents at $71.67 a barrel.

US gold futures gained 0.4 per cent at $1,784.30 an ounce.

Bitcoin rose 1.51 per cent to $48,301.91.