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Hot inflation data but could have been worse


A person shops at a supermarket in New York City on December 14, 2022.

Yuki Iwamura | AFP | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today 

Nasdaq hits new high
Wall Street ended Thursday
on a high note as the tech-heavy Nasdaq Composite hit its first closing record since November 2021, rising 0.9%. The S&P 500 also jumped to a record close, up 0.52%. The Dow Jones Industrial Average inched higher by 0.12%. Bitcoin also topped $62,000 to close out its best month since December 2020.

Microsoft’s AI chatbot for finance
Microsoft is rolling out a Copilot artificial intelligence chatbot for people working in finance. The tech giant said the new offering can perform a handful of common role-specific actions in Excel and Outlook. After testing the tool, Microsoft said its own finance department has seen time savings.

Market unlikely to burst
Bob Parker, senior advisor at trade body International Capital Markets Association, told CNBC there are signs of a bubble in company valuations and investor concentration in the technology sector. But he isn’t too worried that the market is on the brink of a bursting given a key difference with previous bubbles.

Dell soars on earnings beat
Dell shares spiked 15% after the company posted fourth-quarter results that topped estimates and showed robust demand for its artificial intelligence servers. Chief Financial Officer Yvonne McGill said the company is increasing its annual dividend by 20% to $1.78 per share, which she called a “testament to our confidence in the business.”

[PRO] Europe’s ‘Super 7’
Citi picked “Super 7” European stocks that it said are similar to the “Magnificent 7” U.S. technology stocks but have cheaper valuations leaving more room for them to rise. “These could be beneficiaries in a continued ‘narrowing’ environment,” the bank’s strategists noted.

 

The bottom line

January’s inflation came in hot and that isn’t great for the overall economic picture.

But the absence of worse-than-expected news was a relief for Wall Street nonetheless.

Data revealed the Fed’s preferred measure of inflation was stubbornly above the central bank’s target.

Still, figures for both headline and core personal consumption expenditures price index rose in line with Wall Street consensus. The lack of upside surprises soothed investor jitters and explains the stock markets’ muted reaction to the news.  

“The increase in the core PCE deflator for January stuck to script, coming in a hot 0.42%. But the increase was juiced by problematic seasonals,” Mark Zandi, chief economist at Moody’s Analytics, posted on X.

“Abstracting from the measurement issues, underlying inflation appears close to 2.5% annualized. Within hailing distance of the Fed’s 2% target. And everything points to continued moderation in inflation. Time for the Fed to begin cutting interest rates.”

Yet, the strong core prices won’t be welcome news for the Fed as they reflect lingering price pressures. The big question remains what the latest reading means for the central bank’s plans to lower interest rates later this year.

Atlanta Fed President Raphael Bostic noted the recent data showed the road back to the central bank’s inflation goal will be “bumpy.”

“They’ve come in higher than people hoped, but if you look over the long arc, the line is still going down,” he said Thursday. “That’s an important thing to keep in mind.”

That means February’s inflation data will come under scrutiny as Fed officials look for more evidence on whether January’s hot print was just a one-off.

— CNBC’s Jeff Cox contributed to this story.




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