U.S. Stocks Show Notable Turnaround After Seeing Early Weakness

After an early move to the downside, stocks have shown a notable turnaround over the course of morning trading on Friday. The major averages have climbed well off their lows of the session and into positive territory.

In recent trading, the major averages have reached new highs for the session. The Dow is up 118.82 points or 0.4 percent at 33,146.31, the Nasdaq is up 35.28 points or 0.3 percent at 10,511.40 and the S&P 500 is up 19.69 points or 0.5 percent at 3,842.08.

The turnaround by stocks came after revised data from the University of Michigan showed one-year inflation expectations fell by more previously estimated in the month of December.

The report showed one-year inflation expectations in December were downwardly revised to 4.4 percent from 4.6 percent.

One-year inflation expectations were at the lowest level in 18 months, down sharply from 4.9 percent in November.

“Declines in short-run inflation expectations were visible across the distribution of age, income, education, as well as political party identification,” said Surveys of Consumers Director Joanne Hsu..

Five-year inflation expectations in December were also downwardly revised to 2.9 percent from 3.0 percent, which was unchanged from November.

The early weakness on Wall Street came as a closely watched Commerce Department reading on inflation showed consumer price growth slowed by more than expected in the month of November.

The reading on inflation, which is said to be preferred by the Federal Reserve, showed the annual rate of consumer price growth slowed to 5.5 percent in November from an upwardly revised 6.1 percent in October.

Economists had expected the annual rate of consumer price growth to slow to 5.3 percent from the 6.0 percent originally reported for the previous month.

Excluding food and energy prices, annual core consumer price growth slowed to 4.7 percent in November from 5.0 percent in October, in line with economist estimates.

On a monthly basis, consumer prices crept up by 0.1 percent in November after climbing by 0.4 percent in October, while core consumer prices edged up by 0.2 percent in November after rising by 0.3 percent in October.

“Inflation is trending lower, but a return to 2% inflation is far away,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics. “More policy tightening by the Fed early next year is likely.”

Overall trading activity has remained somewhat subdued, however, as some traders look to get a head start on the holiday weekend.

Energy stocks are seeing substantial strength on the day as the price of crude oil for February delivery surges $2.66 to $80.15 a barrel.

Reflecting the strength in the energy sector, the NYSE Arca Oil Index is up by 2.9 percent, the Philadelphia Oil Service Index is up by 2.4 percent and the NYSE Arca Natural Gas Index is up by 2.1 percent.

Transportation and brokerage stocks are also seeing some strength in morning trading, while biotechnology stocks have moved to the downside.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan’s Nikkei 225 Index slumped by 1.9 percent, while China’s Shanghai Composite Index fell by 0.3 percent.

Meanwhile, European stocks are turning in a lackluster performance on the day, with the U.K. markets closed early ahead of the holiday weekend. While the U.K.’s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index is up by 0.1 percent and the German DAX Index is up by 0.3 percent.

In the bond market, treasuries have moved back to the downside after ending the previous session modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 6.1 basis points at 3.730 percent.

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