Stock Market Today: S&P 500 Sets Record Despite Sizzling Inflation

November's CPI report showed consumer prices rising at rates last seen decades ago. Investors waffled early Friday but bought into the afternoon.

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A white-hot November consumer price index report had the market seeking direction for most of Friday's session, but the bulls overcame the bears and the S&P 500 set new highs by the time the week's final closing bell rang.

The Bureau of Labor Statistics reported that headline inflation for November was up 0.8% month-over-month and 6.8% year-over-year – the latter was the highest such reading in 39 years. Core inflation (backing out volatile energy and food costs) was blistering as well, up 0.5% MoM and 4.9% YoY, the quickest rate in three decades.

Thing is, the numbers largely didn't come as a shock.

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"Friday's consumer price index print was surprising in its lack of surprise, as the number was exactly what Wall Street was expecting," says George Ball, chairman of investment firm Sanders Morris Harris, adding that "high inflation has been priced into markets for many months now."

The gaudy numbers nonetheless drew widespread attention, drawing parallels between today and the 1970s. "But we think the comparison dubious, despite some similarities," says Rick Rieder, BlackRock's chief investment officer of global fixed income.

"In fact, from the standpoint of real wage growth, the most recent period would appear to be precisely the opposite of what occurred during much of the 1970s and 1980s," he says.

Rieder adds that BlackRock sees headline and core CPI in the 2% to 3% range by the end of 2022. Kiplinger economists peg 2022 inflation at 2.7%.

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Nonetheless, several strategists believe November's reading will force the Federal Reserve's hand.

Anu Gaggar, global investment strategist for Commonwealth Financial Network, says this morning's print "will reinforce the Fed's resolve to accelerate tapering. With the strength in the economic recovery, it is time to take the crutches away."

The technology sector (+2.0%) led the way today, thanks in part to its two largest components: Microsoft (MSFT (opens in new tab), +2.8%) and Apple (AAPL (opens in new tab), +2.8%), the latter of which scored another all-time high and is now worth $2.9 trillion by market value.

The S&P 500 surged 1.0% to 4,712, eclipsing its previous all-time high set in November. The Nasdaq Composite finished up 0.7% to 15,630, while the Dow Jones Industrial Average gained 0.6% to 35,970.

Coming up next week is a thin earnings calendar, but one that includes reports from Adobe (ADBE), FedEx (FDX) and Darden Restaurants (DRI). You can check out our earnings previews here.

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(Image credit: YCharts)

Other news in the stock market today:

  • The small-cap Russell 2000 still managed to finish in the red, off 0.5% to 2,210.
  • U.S. crude oil futures gained 1.0% to settle at $71.67 per barrel. For the week, crude futures jumped 8.2%, marking their best weekly performance since late August.
  • Gold futures rose 0.5% to finish at $1,784.80 an ounce. Week-over-week, gold managed a 0.1% gain.
  • Bitcoin recovered by 1.5% to $48,386.14. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
  • Oracle (ORCL (opens in new tab), +15.6%) was a notable gainer today following the software company's earnings report. In its fiscal second quarter, ORCL reported adjusted earnings of $1.21 per share on $10.36 billion in revenue – besting the $1.11 per share and $10.21 billion analysts were expecting. Oppenheimer analyst Ray McDonough also waxed optimistic about the company's total cloud revenue, which grew 22% year-over-year and fiscal 2022 cloud guidance, which is expected to reach the mid-20% range. However, McDonough maintained his Perform (Hold) rating on the shares. "While we remain attracted to Oracle's accelerating growth and cloud momentum, we remain on the sidelines as we look for a greater margin of safety," he wrote in a note.
  • Chewy (CHWY (opens in new tab)), on the other hand, plunged 8.1% in the wake of earnings. The online pet supplies retailer reported revenue of $2.21 billion, which was in line with what Wall Street pros were projecting. However, CHWY also recorded a per-share loss of 8 cents for its third quarter – wider than the per-share loss of 8 cents analysts were anticipating – amid labor shortages, higher inflation and supply-chain disruptions, and lowered the top end of its full-year revenue forecast. UBS Research analyst Michael Lasser maintained his Sell rating on CHWY and slashed his price target to $46 from $71, well below today's close at $51.76. "A number of new and existing headwinds were brought to light with CHWY's third-quarter print," Lasser says. "We continue to believe that the risks facing the stock outweigh the rewards at current levels."

Another Big Year for Transports?

Corporate America will have some difficult year-over-year comparisons to deal with in 2022, but by and large, Wall Street still has rosy expectations.

"Analysts still expect the S&P 500 to report high, single-digit earnings and revenue growth in calendar year 2022," says John Butters, senior earnings analyst for FactSet, in a 2022 outlook. Specifically, analysts are projecting 9% growth in profits and 7.3% growth in sales.

"Analysts also expect a record-high (annual) net profit margin of 12.8% in CY 2022," he adds.

This earnings enthusiasm is one reason for bullishness on the part of professional stock pickers, and a prevalent theme among many of our 22 best stocks to buy for 2022 (opens in new tab).

But strategists are also looking over their shoulders, and it shows. For instance, some of the top healthcare picks for the year to come (opens in new tab) are bets on the necessity for additional COVID-19 vaccines and treatments over the next 12 months.

Similarly, several beloved transportation plays hinge on a not-so-great outcome. The world's transportation infrastructure woes have penetrated everyday life to the point where most Americans have had the words "supply chain" pass through their lips at least once in recent months.

The following five transportation stocks represent five popular industry plays heading in 2022, and for the most part, continued supply-chain disruptions next year will add to that bull case.

Kyle Woodley
Senior Investing Editor, Kiplinger.com

Kyle is senior investing editor for Kiplinger.com. As a writer and columnist, he also specializes in exchange-traded funds. He joined Kiplinger in September 2017 after spending six years at InvestorPlace.com, where he managed the editorial staff. His work has appeared in several outlets, including U.S. News & World Report and MSN Money, he has appeared as a guest on Fox Business Network and Money Radio, and he has been quoted in MarketWatch, Vice and Univision, among other outlets. He is a proud graduate of The Ohio State University, where he earned a BA in journalism.