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Dow Lifts Ahead of Inflation Data, Oil on a Tear, Bitcoin Inches Higher—and What Else Is Happening in the Stock Market Today

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Federal Reserve Chair Jerome Powell has said the Fed will act against inflation. Today’s inflation data may see a 40-year high.

Brendan Smialowski-Pool/Getty Images

Stocks were rising Wednesday ahead of key U.S. inflation data, with economists predicting the highest year-over-year rise in inflation in 40 years.

Futures for the Dow Jones Industrial Average indicated an open 50 points or 0.1% higher, after the index rose 183 points Thursday to close at 36,252. The S&P 500 was on track for a similar start, with futures showing the tech-heavy Nasdaq poised to open 0.2% in the green.

Overseas, London’s FTSE 100 rose 0.7%—capturing the highest levels seen since the Covid-19 crash of February 2020—while in Hong Kong the Hang Seng Index surged 2.8%. International markets were buoyed by Wall Street’s rally Tuesday, which followed Senate testimony from Federal Reserve Chair Jerome Powell at the hearing for his renomination to lead the central bank for a second term.

Powell’s confidence in the U.S. economy and message that the Fed would act to curb high inflation has soothed investors’ nerves—spurring a buying streak. His words came after recent concerns in the market about tighter monetary policy. Last week, signals suggested the Fed was heading for earlier, faster interest-rate increases—maybe three this year, with the first in March—and an eventual reduction of its balance sheet.

Helping the rally—especially in bond yield-sensitive tech stocks—was an easing-off among long-duration Treasury yields, which had spiked. The yield on the benchmark 10-year U.S. note came down from its Covid-19 pandemic-era high of 1.8% and was hovering below 1.75% Wednesday; it began 2022 around 1.53%.

“The more positive tone appears to have come about as a result of the inability of U.S. treasury yields to build on their recent gains, after Powell insisted that while the Fed was going to start the ball rolling on a normalization process, that it would be a long process from where we are now,” said Michael Hewson, an analyst at broker CMC Markets. 

In the day ahead, all eyes will be on U.S. consumer-price inflation (CPI) data for December, which is a key measure of inflation. Estimates are for a year-over-year increase of 7%, which would be the highest annual CPI print since 1982.

“Repeated upside surprises in the inflation data have sent the year-on-year numbers up to multidecade highs, putting significant pressure on the Fed,” said Jim Reid, a strategist at Deutsche Bank . “Indeed if you look at the monthly headline CPI reading, seven of the last nine releases have come in above the consensus estimate.”

Hewson said that the CPI data “could well once again spark volatility, if we get a number well north of 7%.”

In commodities, oil prices consolidated gains that came in tandem with Powell’s message Tuesday. Futures contracts for international oil benchmark Brent were nearing $84 a barrel, having begun the week at $81.50. U.S. futures for West Texas Intermediate crude rose to well above $81.

“Oil prices rocketed higher overnight as the Powell testimony removed the threat of early rate hikes, for now,” said Jeffrey Halley, an analyst at broker Oanda. This has allowed fundamentals to reassert themselves: constrained production among OPEC+ members—the group of oil-producing nations including Russia and Saudi Arabia—and optimism over the Omicron variant of coronavirus.

“This sets the scene for more gains in the week ahead, having traded sideways the past few sessions as equity markets have corrected lower,” Halley added.

Cryptocurrencies were also higher. Bitcoin —the leading crypto—rose 2.5% over the last 24 hours, according to data from CoinDesk, trading just below $43,000. Smaller peer Ether was up almost 5% across the same period to above $3,250.

Here are four stocks on the move Wednesday:

Leading a rally in Hong Kong were Chinese tech stocks, including Alibaba (ticker: BABA), JD.com (JD), and Tencent (0700.H.K.), which rose 5.9%, 11%, and 4.5%, respectively. The U.S.-listed Chinese shares of Alibaba and JD.com were poised for gains in the U.S. premarket.

Dutch health conglomerate Koninklijke Philips (PHG) dropped 14% in Amsterdam trading, with its U.S.-listed stock down 15% in the premarket. The dive follows the release of preliminary fourth-quarter sales showing revenue of approximately €4.9 billion ($5.6 billion), below expectations of €5.2 billion, largely due to supply-chain issues. Quarterly earnings are expected to also be lower than estimates.

Write to Jack Denton at jack.denton@dowjones.com