CPI Reaction: Inflation heats up to a 39-year high, Stocks rally as rate hike expectations get pushed back, Peloton’s PR nightmare

US stocks rallied after the latest inflation report did not come in as hot as many were expecting. Wall Street did not see inflation with a 7-handle and that allowed risky assets to rise, while the dollar turned negative as traders anticipate the Fed won’t be forced to deliver a rate hike well before summer.

The stock market rally did not stick as economists still mostly agree that this is not the peak for inflation and that pricing trends will continue to track higher. The preliminary University of Michigan sentiment report showed modest rebounds across sentiment, current conditions, and expectations. Inflation expectations over both the next year remained anchored at 4.9% and the 5-10 year at 3.0%.  Despite today’s rebound, consumer sentiment still looks vulnerable and will likely struggle if these widespread price increases continue.  

CPI

November’s headline month-over-month CPI reading increased 0.8% was higher than the 0.7% estimate but lower than the prior month’s reading of 0.9%.  Some of the inflation is moderating but the year over year reading came in at 6.8%, the hottest since 1982.

Broad based price increases had groceries (meat, poultry, fish, and eggs) skyrocket 12.8%, airline prices were up 4.7%, energy costs were 3.5% higher (gasoline delivered another 6.1% increase), new vehicles rose 1.1%, while used cars increased 2.5% and apparel climbed 1.3%.

Appetite for equities remains undeterred as traders appear to be confident that eventually at some point in the middle of next year a lot of these pricing pressures will fade.

Peloton (**Spoilers below for HBO’s Sex and the City premier)

2021 has been a rough ride for Peloton shares as they appear to be headed back to pre-pandemic levels. The latest slide could be attributed to another downgrade, this time from Credit Suisse, but some traders are in shock over how Peloton played a major role in the Sex and the City premier. The fitness equipment maker was dealt another potential PR crisis (earlier in the year, they had a tragic treadmill accident).

Death by Peloton was all over social media after Carrie Bradshaw, the protagonist in HBO franchise Sex and the City lost her husband to a heart attack shortly after he had an intense workout on his Peloton bike.

Peloton was aware HBO was planning on using the bike but was unaware of the larger context surrounding the scene. Peloton Spokesperson Kelly emailed a statement from a member of their health and wellness advisory council that blamed Mr. Big’s heart attack on his “extravagant lifestyle” and history of heart disease. 

Peloton shares have gone from a pandemic favorite trade to a stock no one wants to touch.    

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya