Stocks climbed higher again Wednesday, with one major benchmark carving out its fourth straight win. Today's upside came as optimism grew that tomorrow's release of the Consumer Price Index (CPI) will show that inflation is cooling fast enough to encourage the Federal Reserve to reconsider its size and pace of interest-rate hikes.
The S&P 500 finished the day up 1.3% at 3,969 and the Dow Jones Industrial Average added 0.8% to 33,973. The Nasdaq Composite rose 1.8% to 10,931, marking its fourth straight win.
Economists expect tomorrow's CPI release to show that inflation continued to moderate in the final month of 2022. The consensus estimate, according to Dow Jones, is for the CPI to be up 6.5% year-over-year in December. Core CPI, which excludes volatile food and energy prices, is forecast to rise 5.7% on an annual basis. In November, those figures were 7.1% and 6.0%, respectively.
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"We have had two cooler month-over-month CPI prints in a row," says Alex Pelle, U.S. economist at Mizuho Securities. "A third print on the soft side would more clearly establish a trend in terms of market sentiment, and will give additional momentum to the 'Fed pivot' trades, at least for a time."
The central bank increased its benchmark rate by 0.50% last month, snapping a streak of four consecutive rate hikes of 0.75%. For the Fed's February meeting, the market is currently pricing in a 0.25% rate hike, according to CME Group.
10 Big U.S. Cities With Cheap Rent
One metric that will be closely watched in tomorrow's CPI report is rental prices. The shelter component, which includes rents, comprises the lion's share of the core CPI reading, "so a decline in rents can't come too soon for the Fed," says Phillip Wool, managing director and head of Investment Solutions at Rayliant.
Although the housing market is certainly cooling off, average rents for urban consumers are still up more than 8% year-over-year, according to the Labor Department. Fortunately, not all areas of the nation suffer from excessive rents, which is certainly good news for folks looking to cut costs in this era of higher prices. The 10 biggest U.S. cities with the cheapest apartment rents, for instance, all offer rental options at rates running well below the national average. Some of the metro areas sporting the cheapest apartment rents also happen to land among the 25 cheapest U.S. cities in which to live.
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