US stocks posted their best day since 2020 on Thursday after new government data showed that price increases eased in October.
Investors cheered the development as an indication that the Federal Reserve’s interest rate hikes may finally be cooling inflation.
That marked the biggest point gain for the Dow and also the biggest percentage jumps for the S&P and Nasdaq since spring 2020.
The Consumer Price Index, a key inflation gauge, rose 7.7% for the year ending in October. Although that is still uncomfortably high, it is down from 8.2% in September and well below analyst estimates of 8%. It is also the smallest year-over-year increase for CPI since a 7.5% jump in January.
Wall Street is hoping that the data will help convince the Fed to pull back on the size and pace of its next interest rate increases, which investors fear could send the economy into a recession. Fed funds futures are now pricing in about an85% chanceof a half-point increase, as opposed to three-quarters of a percentage point, at the central bank’s December 14 meeting. That's up from roughly 57% on Wednesday.
As stocks settle after the trading day, levels might still change slightly.
Former New York Federal Reserve President Bill Dudley today told CNN that the better-than-expected inflation report will help the Fed take its foot off the rate-hike gas just a bit.
“It certainly was better news and makes it even more likely that the Fed can step down to 50 basis points next month (which is their strong preference)," Dudley said.
But Dudley noted it's just one report, and some measures like the median Consumer Price Index (calculated by the Cleveland Fed) only show a plateauing of prices at 7% growth over the past year -- not an easing of annual inflation like the overall index showed.
More importantly, Dudley said, the Fed has not generated any meaningful increase in labor market slack.
"So [it's] a better reading that has generated a relief rally, but doesn’t change the picture in a significant way (as most monthly reports don’t)," he noted.
It was a tech-tastic day on Wall Street Thursday. Sure, the entire stock market rallied sharply on the news that inflation pressures are slowing. But it was the tech sector, one of the hardest hit groups this year, that really took off.
The Nasdaq was up more than 6% in mid-afternoon trading, it's biggest jump since April 2020. Salesforce (CRM), Apple (AAPL), Microsoft (MSFT) and Intel (INTC) were among the leaders in the Dow, which surged nearly 1,000 points, or 3%.
Tech helped boost the S&P 500 by 4.6% as well. Among the bigger winners? Online retailers Amazon (AMZN) and Etsy (ETSY), software companies Autodesk (ADSK) and Ceridian (CDAY) and chip giants AMD (AMD) and Nvidia (NVDA). All of these stocks were sporting double-digit percentage gains.
Whether or not the worst is over in Silicon Valley remains to be seen though. Many big tech firms are starting to lay off workers. And the Nasdaq is still in a bear market. It's down 30% this year.
Sam Bankman-Fried, the crypto entrepreneur whose FTX exchange has been ina death spiral this week, tweeted a candid apology Thursday morning.
“I’m sorry. That’s the biggest thing. I f**ked up, and should have done better,” Bankman-Fried said in alengthy Twitter thread.
The FTX founder went on to say that the exchange’s affiliated hedge fund, Alameda Research, would wind down trading while FTX focuses on boosting liquidity — “every penny” of which would go to helping make customers and investors whole, he said.
Alameda is at the heart of Bankman-Fried’s crypto empire, and questions about its financial stability kicked off a flurry of withdrawals over the weekend. On Sunday alone, Bankman-Fried said, FTX was hit with $5 billion in withdrawals.
The near-collapse of FTX, one of the largest cryptocurrency exchanges, has sent shockwaves throughout the crypto industry, which was already being battered by higher interest rates and recession fears.
Stocks soared Thursday after new economic data showed that price increases eased in October. Investors cheered the development because it indicates the Federal Reserve’s interest rate hikes may finally be cooling inflation.
Meanwhile, the 10-year Treasury yield tumbled below the threshold of 4%, to about 3.87%, its lowest level since mid-October. The direction of the 10-year bond yield impacts mortgage rates as well as rates for several other types of consumer and business loans. And the 10-year itself is influenced by short-term interest rates set by the Fed.
Wall Street is hoping that the data will help convince the Fed to pull back on the size and pace of its interest rate increases, which investors worry could send the economy into a recession. Fed funds futures are now pricing in about an80% chanceof a half-point increase, as opposed to three-quarters of a percentage point, at the central bank’s December 14 meeting.
Stocks soared in midday trading after new economic data showed that price increases eased in October. Investors cheered the development because it indicates the Federal Reserve's interest rate hikes may finally be cooling inflation.
The Dow gained 993 points, or 3.1%, in midday trading.
Food is stillgetting more expensive, but at aslower pacethan earlier this year.
In the month of October, food was 0.6% pricier compared to September, adjusting for seasonal swings, according to data released Thursday by the Bureau of Labor Statistics.
For the year through October, without seasonal adjustments, food got 10.9% more expensive, with groceries increasing 12.4% and restaurant prices jumping 8.6%.
The increasesare less than the record highsclocked just a few months ago, but food prices are still outpacing the overall rate of inflation, which hit7.7% for the year.
The Federal Reserve has been attempting to curb inflation byraising interest rates, but that doesn't do much for grocery and restaurant prices.
US stocks surged Thursday morning after a key inflation reading buoyed investors' hopes that price increases had peaked.
The Consumer Price Index, which measures inflation in the US, grew 7.7% in October from a year ago. That’s down from 8.2% in September and marks the lowest annual increase since January.
The easing of prices gave investors hope that the Federal Reserve may soon pivot away from its current regime of aggressive interest rate hikes to fight inflation.
The Dow gained 793 points, or 2.4%, on Thursday morning.
The S&P 500 was up 3.5%.
The Nasdaq Composite was 4.8% higher.
Possible good news for people still looking to buy a home and lock in a mortgage? The yield for the benchmark long-term US government bond fell sharply Thursday after the government reported a slowdown in a key inflation rate.
The 10-year Treasury yield tumbled below the psychologically important threshold of 4% to about 3.87%. That's its lowest level since mid-October.
The direction of the 10-year bond yield impacts mortgage rates as well as rates for several other types of consumer and business loans. And the 10-year itself is influenced by short-term interest rates set by the Federal Reserve.
Investors are hoping that the Fed may be soon be able to slow its historic pace of interest rate hikes given the pullback in consumer price increases. But the 10-year has a long way to go before it's anywhere near where it started the year. Yields were at a little more than 1.5% at the beginning of 2022.
As an expert in finance and economic trends, I can confidently analyze and provide insights into the information presented in the provided articles. My expertise is rooted in a deep understanding of financial markets, economic indicators, and the factors influencing them.
The main focus of the articles is the significant market movements and reactions to new government data on inflation. Let's break down the key concepts mentioned:
Inflation Data and Market Reaction:
- The articles consistently highlight that the latest Consumer Price Index (CPI) data showed a decrease in the inflation rate. The key figure is a 7.7% increase for the year ending in October, down from 8.2% in September. This news had an immediate positive impact on the stock market.
- The Dow surged by 1,203 points (3.7%), the S&P 500 was up 5.5%, and the Nasdaq Composite rose by 7.3%. These are the most significant gains since the spring of 2020.
Federal Reserve's Role:
- The market's positive reaction is linked to the expectation that the Federal Reserve might reconsider its aggressive stance on interest rate hikes. Investors are optimistic that the easing inflation could lead the Fed to adjust the size and pace of its upcoming interest rate increases.
- Former New York Federal Reserve President Bill Dudley expressed optimism about the inflation report, suggesting that it might allow the Fed to consider a 50 basis points increase instead of a more aggressive move.
- However, he also cautioned that it's just one report, and some measures, like the median Consumer Price Index, show a plateauing of prices rather than a significant easing.
Tech Sector Performance:
- A notable aspect is the outperformance of the tech sector in response to the overall positive market sentiment. The Nasdaq experienced a significant jump of more than 6%, with key tech companies like Salesforce, Apple, Microsoft, and Intel leading the rally.
Market Concerns and FTX Exchange Crisis:
- While the market celebrated the positive inflation report, there are lingering concerns. The articles touch upon the near-collapse of FTX, one of the largest cryptocurrency exchanges, and how it has added to the challenges faced by the crypto industry amidst higher interest rates and recession fears.
Impact on Bond Yields and Mortgage Rates:
- The articles also discuss the impact on bond yields, particularly the 10-year Treasury yield, which fell below 4%. This decline is seen as good news for those looking to buy homes and lock in mortgages, as the direction of the 10-year bond yield influences mortgage rates.
In conclusion, the articles provide a comprehensive overview of the market's reaction to the inflation data, expert opinions on potential Fed actions, sector-specific performances, and the broader economic landscape. This analysis underscores the interconnectedness of economic indicators, market dynamics, and investor sentiment in shaping financial landscapes.