By Geoffrey Smith
Investing.com — U.S. stock markets opened higher on Thursday after producer prices data for December encouraged hopes that the trend in inflation may be starting to turn.
By 9:45 AM ET (1445 GMT), the Dow Jones Industrial Average was up 107 points, or 0.3%, at 36,397 points. The S&P 500 was up 0.2% and the Nasdaq Composite was up 0.3%.
Earlier, official figures for December showed that producers had raised their prices by less than feared in the final month of the year, December’s 0.2% increase being the smallest monthly gain since November 2020. Even so, Oxford Economics analyst warned that it’s too early to claim victory over inflation.
“Persistent supply disruptions will pin producer prices near record levels in the near term, especially given a rapidly spreading Omicron variant that will fan inflation pressures,” Rasheed said in a note to clients. “The PPI data adds to a growing body of evidence that the Fed will commence rate lift off in March and undergo balance sheet reduction mid-year.”
High disposable income, supported by windfall profits on financial assets and by fiscal transfers, has led to surging demand across many sectors, allowing companies to increase their prices markedly over the last two years. Two examples illustrated that trend in sharp focus in early trading, with Taiwan Semiconductor Manufacturing (NYSE:TSM) stock rising by 8.4% after it reported another record quarter for sales and better-than-expected profit. The company’s result and bullish outlook indicate that the squeeze on silicon chips, a defining market trend of 2021, isn’t set to ease up much in the near term.
Elsewhere, Lennar (NYSE:LEN) stock rose 3.0% after the home builder raised its annual dividend by 50%, reflecting the windfall it has enjoyed from a surge in demand for housing with more space for working and exercising since the pandemic started. In the same sector, KB Home (NYSE:KBH) stock also rose 13% as it rode a wave of upgrades after its own strong quarterly results.
Less encouragingly, figures released earlier also showed that initial jobless claims rose to a four-week high of 230,000 as the surge in Omicron-variant Covid-19 started to bite into the travel and hospitality sectors, among others. The U.S. has posted record hospital admissions this week as the new and highly-contagious dominant strain has spread across the country. Delta Air Lines warned that its revenue in the current quarter is unlikely to improve, measured against the comparable quarter two years ago, but still struck an upbeat note about recovery later in the year. Delta Air Lines (NYSE:DAL) stock rose 4.3% as the company also managed to report a better fourth quarter than expected.
Elsewhere in aviation, Boeing (NYSE:BA) stock rose 3.0% after Bloomberg reported that China’s regulators may approve the 737 MAX to start flying again as early as this month. That would end a ban that has lasted since two fatal crashes involving the model nearly three years ago.