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.
The Dow rose 1,203 points, or 3.7%. The S&P 500 was up 5.5% while the Nasdaq Composite was 7.3% higher.
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 an 85% chance of 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 in a 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 a lengthy 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.
The Dow gained roughly 1,000 points, or 3.1%, in midday trading. The S&P 500 was up 4.7% while the Nasdaq Composite was 6.3% higher.
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 an 80% chance of 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.
The S&P 500 was up 4.6% while the Nasdaq Composite was 6% higher.
Food is still getting more expensive, but at a slower pace than 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 increases are less than the record highs clocked just a few months ago, but food prices are still outpacing the overall rate of inflation, which hit 7.7% for the year.
The Federal Reserve has been attempting to curb inflation by raising 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.
The Twitter mess has hurt Tesla (TSLA) investors in the past few weeks. Shares of Elon Musk’s electric car giant have tumbled since he took over the social media app and seemingly diverted much of his attention to the little blue bird. One prominent Tesla analyst has grown tired of the drama.
Dan Ives, a prominent, widely quoted analyst with Wedbush Securities, has historically been a big fan of Musk and prominent supporter of Tesla stock. But Ives said in a report Thursday that he was removing Tesla from his list of best ideas because Twitter had turned into an “albatross” for Musk.
He wrote that it could be “a very nervous few months ahead for Tesla investors as they remain the ones that have been punched again and again by the Musk Twitter antics.” He added that “the stock now is deep in the investor penalty box.”
Ives also said that the Twitter saga is “a dark comedy show” and that “Musk has essentially tarnished the Tesla story.” He worries that this “ongoing Twitter train wreck disaster” could “potentially impact the Tesla brand.”
Ives is keeping his “outperform” rating on Tesla stock for now, but he cut his price target from $300 to $250. (Tesla is now trading around $188 following a 6% pop Thursday.) And Ives noted the “Musk overhang…gets worse by the day.”
There may be no place where the Fed’s interest rate hikes are reining in inflation more effectively than on car dealers’ lots.
When inflation kicked into high gear in 2021, a surge in car prices caused by a shortage of available vehicles amid strong demand helped drive up the overall Consumer Price Index.
But with interest rates rising, the amount car buyers are able to pay, especially for used cars, is declining.
Used car prices posted a month-over-month decline for the fourth straight month in October, falling 2.4% compared to September. That marked the largest one-month decline in 19 years. Prices are still higher than they were a year ago, but are now up only 2%, much less than the 7.7% rise in overall prices.
New car prices aren’t showing a decline as of yet, but they’re rising much more slowly than they had been — only a 0.4% increase from September, compared to a 0.7% one-month jump last month and a 0.8% rise in August.
The Consumer Price Index was better than expected and surprised investors, with markets surging on the news. But the Federal Reserve still has far to go in its battle to tame inflation.
“Today’s CPI report shows inflation is moving in the right direction,” said Eric Merlis, managing director, co-head of global markets at Citizens. “The report provides ammunition for the Fed to begin pricing in sub 75-basis-point tightenings. This will be a welcome development for the Fed.”
On a monthly basis, prices rose by 0.4%. That’s on par with the previous month’s increase of 0.4%. Economists were anticipating the monthly figure to grow, given October’s surge in energy prices.
Still, there appeared to be some gains made in a measurement watched even more closely by the Fed: Core CPI, which excludes the more volatile categories of food and energy, was 6.3% for the year ended in October and down from the 6.6% increase posted in September.
Month-on-month, core CPI increased 0.3%. It had logged monthly increases of 0.6% in both August and September.
Wall Street really really liked the October consumer price index report. Stock futures soared after the government reported that prices were up “just” 7.7% over the past 12 months.
Although that is still uncomfortably high, it is down from 8.2% in September and well below estimates of 8%. It is also the smallest year-over-year increase for CPI since a 7.5% jump in January.
Dow futures soared more than 800 points, or 2.5%, following the report. S&P 500 and Nasdaq futures were up 3.1% and 3.9% respectively.
The reason for the enthusiasm? The slowdown in the rate of inflation is a sign that the Federal Reserve’s massive rate hikes, designed to fight inflation, may be working.
And it could mean that the Fed will be able to start pulling back on the pace of its aggressive hikes. Fed funds futures are now pricing in a nearly 80% chance of a half-point increase, as opposed to three-quarters of a percentage point, at the Fed’s December 14 meeting.
Consumer prices rose 7.7% for the year ending in October, according to data released Thursday, showing that the Federal Reserve still has far to go in its battle to tame inflation.
The Consumer Price Index, which measures the changes in prices for a variety of consumer goods and services, measured 8.2% in September.
Get ready for yet another confusing Consumer Price Index report at 8:30 am ET. It could be a mix of good, bad and ugly.
The good: The headline annual number is expected to show a slower pace of inflation, slipping to 8% in October, down from 8.2% in September. So-called core price growth, stripping out volatile energy and food prices, is expected to have eased a bit to 6.5%, down from 6.6% in the previous month.
The bad: But prices are expected to have risen 0.6% overall during the month of October, up from 0.4% in September.
The ugly: Price growth remains uncomfortably high in America. Although there are some signs of easing, inflation is still painful for many Americans, forcing the Fed to continue to raise rates at a historic pace. That is hurting the economy in the process.
Stocks: US stock futures were muted a day after sinking sharply as the midterm elections came in without the predicted “red wave,” and the crypto market melted down.
Today, investors will look closely at inflation data, which could prompt the Fed to continue its historic pace of rate hikes. Dow futures were up 15 points, or 0.1%, the S&P 500 rose 0.1% and the Nasdaq Composite was 0.2% higher.
Fear & Greed Index: 54 = Greed
Crypto: Bitcoin prices were on the rise, up 3% from Wednesday. But the cryptocurrency has fallen by a quarter over the past 5 days.
Oil & gas: US oil was down 1% to around $85 a barrel. Average US gas prices fell to $3.80 a gallon.
Inflation is expected to have eased somewhat in October in part because of improved supply chains but also a weaker housing sector, which has led to decreased demand for home appliances and other goods.
Additionally, the latest inflation numbers could benefit from the way the Bureau of Labor Statistics tabulates the index. To calculate medical services prices, the agency uses health insurance providers’ retained earnings, or profit margins. That data is published once a year and with a lag. During the past 12 months, the medical services category reflected the robust profit margins from 2020, when people stayed home or delayed doctor visits — but that will rebalance in the October report, which will reflect the 2021 return to elective surgery and other health services.
CPI has come in hot for the past two months, showing overall price increases mellowed only slightly during the respective 12-month periods, and core CPI shot up much faster than anticipated.
Shelter remained an inflation driver, but the surge in core CPI was a reflection of a potentially sticky problem: Inflation has been settling in deeper into service industries.
Unlike in goods, where inflationary inputs include supply chains and commodity prices, the biggest input into service-providing industries is labor costs.
The economy was top of mind for voters in the midterm elections, exit polls showed, adding even more weight to a highly anticipated inflation report due out on Thursday.
The Consumer Price Index for October, which measures the change in price of everything from pork chops to plane tickets, will provide the latest insight on whether Americans saw any relief last month from the current bout of historically high prices.
Economists estimate the pace of inflation likely slowed somewhat in October — but nowhere near enough for the Federal Reserve to tap the brakes on the aggressive rate hikes it has rolled out in its battle to cool the economy.
Consensus estimates on Refinitiv put annual inflation at 8% in October, which would be a slower pace of increase than the 8.2% seen in September’s reading and the lowest year-over-year increase since February.
However, higher energy prices likely pushed up monthly inflation by 0.6%.
Core CPI, which doesn’t include the volatile food and energy categories, is expected to have dropped to a 6.5% rate of increase for the 12-month period ended in October, down from 6.6% a month earlier.
