The SPDR S&P 500 ETF Trust (NYSE:SPY) traded lower by 1.3% on Thursday morning after the Labor Department reported a 7.5% increase in the consumer price index in the month of January, the fastest inflation growth since 1982.
What Happened: The headline CPI rose 7.5% in January, outpacing economist estimates of 7.2% and marking the highest growth rate since February 1982. The CPI was up 0.6% on a monthly basis.
Core inflation, which excludes volatile food and energy prices, was up 6% in January, exceeding economist estimates of 5.9%.
Fuel oil costs were up 9.5% month-over-month and 46.5% compared to a year ago. Used car prices were up 1.5% in January and 40.5% over the past 12 months. Shelter costs were up 0.3% in January and 4.4% year-over-year.
The latest CPI inflation reading comes after the Labor Department reported last week that U.S. wages grew 5.7% year-over-year in January. Unfortunately, the latest inflation numbers suggest prices are rising faster than wages for many Americans.
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Voices From The Street: Barry Gilbert, Asset Allocation Strategist for LPL Financial, said the January inflation numbers represented "another surprise jump" that will do little to ease investor concerns.
"While things may start getting better from here, market anxiety about potential Fed overtightening won’t go away until there are clear signs inflation is coming under control," Gilbert said.
Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, said the Fed needs to take action now to stabilize prices.
"It’s possible that the actions available to them – raising interest rates and reducing their balance sheet – are not sufficient to tame the type of inflation that we are experiencing now and that’s why they are in such a difficult position and risks for markets are much higher than are currently being priced in," Zaccarelli said.
Jamie Cox, Managing Partner for Harris Financial Group, said there is a silver lining to the latest inflation numbers.
"Based on the 5 year breakevens staying around 2.1%, people still believe inflation is pandemic related and not permanent," Cox said.
