Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed Thursday on higher ground following the release of what economists called an unusual and confusing inflation report.
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November’s Consumer Price Index (CPI) came in at 2.7% year-over-year, below the consensus estimate of 3.1%, while core CPI, which strips out volatile food and energy prices, was 2.6%, the lowest rate since March 2021 and below the estimate of 3.0%.
However, several economists urged investors to view the figures with caution, as November’s numbers only included data for about half of the month, while the Bureau of Labor Statistics (BLS) was unable to collect data in October due to the government shutdown, which ended on November 12.
“It’s possible that this does reflect a genuine drop off in inflationary pressures, but such a sudden stop, particularly in the more-persistent services components like rent or shelter is very unusual, at least outside of a recession,” wrote Capital Economics economist Paul Ashworth. Navy Federal Credit Union Chief Economist Heather Long added that “It’s hard to take this data seriously,” although she acknowledged a “real” drop in gas prices.
Meanwhile, continuing jobless claims for the week ended December 6 were 1.897 million, the lowest since May when excluding the previous week’s claims marked by Thanksgiving volatility. Initial jobless claims, which act as a gauge for layoffs, totaled 224,000 in the week ended December 13, slightly below the estimate of 225,000.
Elsewhere, President Trump promised the “largest tax cuts in American history” during an address from the White House on Wednesday evening. “Under these cuts, many families will be saving between $11,000 and $20,000 a year, and next spring is projected to be the largest tax refund season of all time,” Trump said. He also announced a $1,776 “warrior dividend” for 1.45 million U.S. military members that is scheduled to arrive by Christmas.
Finally, federal restrictions on marijuana are set to ease after Trump signed an executive order to downgrade the drug to Schedule III from Schedule I. The move received criticism from several Congressional Republicans, who argued that the reclassification would worsen the U.S. addiction crisis and benefit drug cartels.
The S&P 500 (SPX) closed with a 0.79% gain, while the Nasdaq 100 (NDX) returned 1.51%.
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