The pace of inflation unexpectedly accelerated in December due to an increase in housing. The Labor Department reported that Core CPI in December, which excludes food and energy, increased 0.3% from 0.1% seen in November. This is the biggest advance since January, as prices for new motor vehicles, used cars and trucks and motor vehicle insurance increased.  The core CPI advanced 1.8% in the 12 months through December, spiking up from 1.7% in November.  Economists are expecting that the Federal Reserve will lift its inflation toward Fed’s current 2% target; current inflation rate is, due to tightening labor market, rising commodity prices and a weak dollar.  

• Energy -1.2%
• Home prices  +0.8%
• Used-vehicle +1.4%
• Airfares -0.5% 

According to the Commerce Department, U.S. retail sales rose in December and November’s gain was revised upward, showing a robust in holiday-shopping season. The report showed an increase of 0.4% last month, advancing 5.4% from a year ago. Sales during December were supported by a 1.2% increase in gardening and building material stores. Sales at auto dealerships gained 0.2% and service stations were unchanged last month. 

The markets are rocking led by a 200 point gain in the Dow. All the major indices are up nicely. Volumes however are below average.  On the NYSE 370 stocks hit new highs compared to 44 new lows and advancers led decliners 1583/1328. On the NYSE, 366 stocks hit new highs versus 15 new lows and advancers outpaced decliners 1893/973.