Wednesday's early afternoon trade: stocks climb after inflation data; volatility eases

US stocks rose on Wednesday as investors digested a stronger-than-expected inflation data and a surprise drop in January retail sales, which shifted the focus from rising inflation to the prospect of stagflation. The Labour Department's core Consumer Price Index, which excludes the volatile food and energy components, increased 0.3 percent in January, while economists polled by Reuters had forecast an increase of 0.2 percent. However, the year-on-year rise was unchanged at 1.8 percent.
The data again raised the specter of rising inflation and rekindled fears that the Federal Reserve could be forced to be more aggressive with interest rate increases. However, data showed US retail sales fell 0.3 percent last month, the biggest decline in nearly a year and in sharp contrast to economists' estimates for a 0.2 percent increase.
US stock futures fell more than 1 percent after the data was released at 8:30 am ET. An hour later, the stock market opened a third of a percent lower and has slowly pared losses since. "The initial reactions were amplified. We took a big dive in equity markets and now, as we digest the numbers a little bit further, people are starting to calm down," said Jim Smigiel, head and chief investment officer of Absolute Return Strategies at SEI Investments in Philadelphia.
By 12:28 pm ET (1728 GMT), the Dow Jones Industrial Average gained 0.14 percent to 24,674.96, the S&P 500 rose 0.53 percent, to 2,677.07 and the Nasdaq Composite was up nearly 1 percent at 7,080.24.