U.S. stock market jumps Monday ahead of November CPI publication

The U.S. stock market jumped Monday, ahead of the publication of November’s consumer price index (CPI).

The Dow Jones was up 528.58 points or 1.58 percent and ended the trading session at 34,005.04. The S&P 500 concluded Monday at 3,990.56, going up by 56.18 points or 1.43 percent. Meanwhile, the tech-leaning NASDAQ Composite climbed 139.12 points or 1.26 percent and closed at 11,143.74.

Microsoft’s shares went up by 2.89 percent after announcing a partnership with the London Stock Exchange Group. The tech company is expected to profit at least $2.8 billion throughout the ten-year collaboration. Additionally, Microsoft has agreed to buy a four percent stake in the exchange.

The stock of Coupa Software, Inc. spiked up more than 23 percent after American private equity company Thoma Bravo reportedly almost concluded an $8 billion deal to purchase the company.

On the other hand, Rivian Automotive Holding’s shares declined by more than four percent after the company canceled a partnership with Mercedez-Benz. Both companies initially planned to launch commercial electric vans together. Earlier this year, Amazon posted a $3.9 billion loss for its investment in Rivian.

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Investors are waiting for November’s consumer prices release, which analysts have predicted to be lower than the previous month while still in the higher range. Analysts said the CPI reading would affect the market movement in the following days.

According to JPMorgan Chase, the S&P 500 could rally up to 10 percent with a softer CPI. The investment company added that the chance was relatively low at about five percent. For instance, cooler October’s CPI caused a 5.5 percent jump in the S&P index last month.

Brandywine Global portfolio manager John McClain advised investors not to look too much into the market movement on Monday and instead focus on the action after the CPI publication. McClain added that people developed “a false sense of security” that the central bank would be able to engineer a soft landing for the economy.

“The Fed isn’t cutting anytime soon,” McClain said. “This is just going to be a longer cycle compared to 2020.”

In the oil sector, crude oil futures also posted a sixth consecutive loss Monday. Analysts said the main contributor was an expectation of declining global oil demand. In the last trading session, the price for WTI-grade crude oil went down 0.51 percent. The price, however, remained above the $70 mark.

The price of gold also went down over one percent on Monday. Although the gold sector recovered slightly in the following session, prices remained flat at $1,782.17 per ounce and $1,793.10 per ounce for spot gold and gold futures, respectively.

Central bank’s next step

The Federal Reserve will also use the CPI to decide on an upcoming rate hike due on Wednesday. A cooler CPI justifies a smaller rate increase, which most investors believe will be 50 basis points. Although most Fed officials have said they can slightly loosen the tight monetary policy, the central bank will likely maintain a high benchmark interest rate for a while.

A Bank of America (BofA) team led by its head of U.S. Economics, Michael Gapen, warned that a potential decline in core CPI — which excludes food and energy costs — could result from holiday discounts and lower used car prices. The BofA report added that the housing market in the U.S. might remain “sticky” and would stay that way until the following year.

The housing market is sensitive to rate increases, which determine borrowing costs. Data have shown that mortgage rates across the U.S. soared this year, resulting in lower demands in the real estate market.