Oil Prices Trump Rate Hike Fears as Markets Climb Despite Economic Woes
On September 11th, it was a somber day as markets marked 25 years since the devastating attacks that led to four consecutive days of closures. This milestone is significant, coming only after the outbreak of World War I in 1914.
The current inflation data released on Friday reinforced expectations for a rate hike by the Fed. The odds now stand at 86.7%, according to CME Group's FedWatch tool, surpassing 85%. However, despite this bleak economic outlook, stock market indexes showed resilience and rose instead of falling.
One key factor behind this unexpected trend is the decline in oil prices, which outweighed the weighty inflation report. Brent Crude dropped by 2.7% to $104.68, while US Oil Fund (USO) plummeted 3.2%. This decrease had a ripple effect on other energy-related stocks.
Major tech companies, such as Apple and Alphabet, experienced significant gains of 2.5% and 2.7%, respectively, largely in reaction to the inflation data. Caterpillar rose by 2.1%, contributing 99 points to the Dow Jones Industrial Average.
The market's optimism is puzzling given the dire consumer sentiment index, which fell 7.5% in September to a record-low of 47.8. People are concerned about rising inflation and the strained oil shipping system.