Business Maverick: Cooler Inflation Mixed With Strong Labor Data Leaves Traders Puzzled

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Inflation data slowed in December, as widely expected, but labor market data remained strong, with both initial and continuing claims coming in lower than expected. Wall Street struggled to weigh how each would affect future rate hike decisions for the ...

In premarket trading and then at the open, the S&P 500 Index struggled for direction, while two-year Treasury yields fell.

“The easy part of the decline in inflation may be underway — goods inflation is declining, commodity prices are falling,” Priya Misra, global head of rates strategy at TD Securities told Bloomberg TV. “The much harder part is getting that service inflation down consistent to 2%.”“The trouble with US inflation numbers coming in bang on target is that markets had been surfing a wave of optimism that the numbers might just come in even cooler.

“The labor market is still very tight, though the claims data should be taken with a grain of salt due to the noise in holiday adjustments.” “The market has priced in a very optimistic scenario about CPI in the previous days. The numbers came in at exactly the expectations level. That means that some of the optimism in the markets may get unwound both in equities and fixed income.”

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