Wall Street stocks edged up Wednesday after another report showing higher US inflation, while the dollar continued to sell off against other major currencies.
The Labor Department said its consumer price index jumped by seven percent last year, its fastest pace in four decades. However, the month-on-month increase slowed to 0.5 percent from November, indicating the price surge may be stabilizing.
Markets viewed the data as largely in line with expectations and unlikely to spur a more aggressive response from policymakers than the one outlined Tuesday by Federal Reserve Chair Jerome Powell in congressional testimony. Stocks had rallied after he spoke.
The data "is largely expected," said Jack Ablin, chief investment officer at Cresset Capital, who noted that increasingly higher inflation readings are becoming unlikely.
"We believe that actually, inflation is peaking, probably around now," Ablin said. "And it will likely head lower as we move into the rest of the year."
US stocks had a choppy session following solid gains in leading European and Asian bourses. But all three major indices advanced again, with the S&P 500 winning 0.3 percent.
"It looks like the market had prepared for even hotter inflation, which obviously didn't materialize. So the reaction can best be described as relief," said Fawad Razaqzada, an analyst at ThinkMarkets.
Fears of an abrupt end to the ultra-loose Fed monetary policies that have helped power a two-year market rally made for a volatile start to trading this year.
But on Wednesday, the mood appeared resolutely upbeat.
Data out of China showed inflation in that country had eased, handing Beijing room for measures to kickstart the stuttering economy, including interest rate cuts, according to analysts.
Michael Hewson at CMC Markets UK said that some might be interpreting the Chinese numbers as "a leading indicator that global inflationary pressures might be starting to diminish."
That "seems a little premature" given the US data, he added.
In other markets, oil prices pushed higher, while the dollar continued to pull back after rallying in the latter period of 2021 in anticipation of Fed monetary tightening.
The fall in the dollar is a "'buy the rumor, sell the fact,' trade," said a note from Joe Perry on Forex.com after the US currency "had been in a long-term upward sloping channel since May 2021."
- Key figures around 2040 GMT -
New York - DOW: UP 0.1 percent at 36,290.32 (close)
New York - S&P 500: UP 0.3 percent at 4,726.35 (close)
New York - Nasdaq: UP 0.2 percent at 15,188.39 (close)
London - FTSE 100: UP 0.8 percent at 7,551.72 (close)
Frankfurt - DAX: UP 0.4 percent at 16,010.32 (close)
Paris - CAC 40: UP 0.8 percent at 7,237.19 (close)
EURO STOXX 50: UP 0.8 percent at 4,316.39 (close)
Tokyo - Nikkei 225: UP 1.9 percent at 28,765.66 (close)
Hong Kong - Hang Seng Index: UP 2.8 percent at 24,402.17 (close)
Shanghai - Composite: UP 0.8 percent at 3,597.43 (close)
Euro/dollar: UP at 1.1451 from $1.1367 late Tuesday
Pound/dollar: UP at 1.3713 from $1.3635
Euro/pound: UP at 83.48 pence from 83.36 pence
Dollar/yen: DOWN at 114.53 yen from 115.30 yen
Brent North Sea crude: UP 1.1 percent at $84.67 per barrel
West Texas Intermediate: UP 1.7 percent at $82.64 per barrel