Medicare Agent News: A Photo Finish

Wednesday, September 14, 2022

A Photo Finish

By Connor Smith | Wednesday, September 14

Seesaw. U.S. stocks rallied late today to close out a bumpy session in positive territory.

The Dow Jones Industrial Average rose 0.1% to 31,135 after hitting an intraday low of 30,885 at about 3:33 p.m. The S&P 500 rose 0.3%, while the Nasdaq Composite rose 0.7%. Today's gains followed the worst one-day selloff since June 2020.

The producer-price index rose 8.7% year over year in August, down from 9.8% in July and below estimates for an 8.9% jump. That was the good news, writes Barron's Sabrina Escobar, who points out that falling energy prices drove the headline decline, with the index for gasoline falling 12.7%.

August’s lower-than-expected reading will do nothing to assuage market concerns about the sticky nature of the current bout of inflation. Consumer prices decelerated slower than predicted in August, climbing at an annual pace of 8.3%, according to data released on Tuesday. As with Wednesday’s PPI reading, gas drove the CPI headline decline, but core CPI increased, with prices for everything from groceries to health insurance surging.

“There is a divergence in headline and core inflation building, where headline is cooling and core is heating up,” said Jamie Cox, managing partner at Harris Financial Group. “That’s an odd phenomenon and likely influenced by the shift from goods to services post pandemic. The Fed should proceed with caution and not hit the emergency brake on rate hikes.”

Oanda's Edward Moya writes that the rebound for stocks showed investors believe the Federal Reserve will pivot before they risk a severe recession.

"Recession risks are obviously going up now that the Fed will likely need to take rates above 4.00%, but it is still unlikely we will see them take rates to the 5.00% level," Moya writes. "Today’s PPI numbers show that underlying trends are improving and that should lead to optimism that we will continue to see prices come down over the next few months."

But, if we've learned anything this week it's that inflation continues to defy expectations. Investors should proceed with caution.