Stock Market Today: Hotter-Than-Expected Inflation Data Keeps Lid on Stocks

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Stocks ended the week on a down note following a disappointing reading on inflation. The Labor Department said earlier that the producer price index (PPI), which measures what suppliers are charging businesses and other customers for goods and services, was up 7.4% year-over-year in November and 0.3% month-over-month. Ahead of next week's Fed meeting, investors were hoping for a bigger sign that inflation is easing, and that was reflected in today's price action.

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Diving deeper into today's PPI update, the yearly increase was lower than the 8.1% annual jump seen in October, while the monthly rise matched the previous report. Both November readings were higher than economists were expecting, however. The bulk of the gains came from rising food prices, which were up 3.3% over October. On the flip side, energy prices were down 3.3% from the month prior.

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Also in focus today was the University of Michigan's consumer sentiment report, which edged up to 59.1 in December's preliminary reading from November's 56.8. Additionally, consumer inflation expectations for the next 12 months declined slightly, to 4.6% from last month's 4.9%.

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The upbeat consumer sentiment reading helped stocks finish off their lows, but the major market indexes still ended the day lower. At the close, the Dow Jones Industrial Average was off 0.9% at 33,476, the S&P 500 Index was 0.7% lower at 3,934, and the Nasdaq Composite was down 0.7% at 11,004.

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Next week is a big one. The November consumer price index (CPI) is due out Tuesday morning, while the Federal Reserve's next policy announcement will be released on Wednesday afternoon. "Clearly inflationary pressures are abating, from input costs to supply chain pressures, and in some cases demand and wages," says Matt Peron, director of research at Janus Henderson Investors. "However, that is not yet being reflected in the official inflation statistics, including this morning's PPI. This may keep some pressure on the Fed to maintain higher policy rates and as a result will pressure equity prices in the near term." Although Peron says his team remains "cautious on risk assets until the inflation picture" is resolved, they "do see a light at the end of the tunnel in coming months."

Investors concerned about the potential for additional volatility in the equities market over the near term do have options. Quality dividend stocks and high-yield exchange-traded funds (ETFs) are just two of the ways investors can protect against any additional stock market turbulence. Low-volatility ETFs are another good option. The 10 funds featured here should help investors reduce volatility in their portfolios, and they do so using a number of different strategies. Check them out.

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With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.