Thursday was a quiet day in the stock market, as indexes traded with very modest changes. The NASDAQ and the S&P 500 decreased slightly, while the Dow Jones changed negligibly. Nevertheless, this week, the indexes managed to recover most of the losses of the past weeks and remain on the uptrend, with only the Dow Jones likely to slow down. Now, all eyes are on the US inflation data for November, which will be released today. Previously, inflation beat market expectations and soared to 6.2% YoY. Currently, market players see prices rise to 6.7%-6.9% annually. Several months ago, the Federal Reserve's chairman Jerome Powell forecasted the inflation would reach 5% and then begin to decline, but now his prediction is clearly off the mark. With increased cash supply outpacing production, it is only logical that inflation would be on the rise. At this point, it has become the number 1 problem for the Fed.
Today's inflation data would influence the next week's Fed meeting, the results of which would be published on December 15. If prices continue to advance, it is extremely likely that the Federal Reserve would accelerate the pace of the QE taper. A faster wind down of bond-buying by about $25-30 billion per month would be a bullish factor for USD and a bearish one for stocks, as investors would switch focus from equities to low risk assets such as bonds. However, this would require inflation to decline - US treasury bonds with a yield of 1.5% are not a good investment when the inflation rate is 7%. In any case, investor sentiment is likely to change very gradually.
