Stocks mounted their biggest rally since 2020 after October’s reading of consumer prices raised hopes that inflation has peaked.
The Dow Jones Industrial Average jumped greater than 1,000 points, or greater than 3% for its biggest one-day gain because the market was emerging from the depths of the pandemic bear market. The S&P 500 jumped 4.6% for its biggest one-day rally since April 2020. The Nasdaq Composite surged 6%, also its biggest pop since 2020.
October’s consumer price index rose just 0.4% for the month and seven.7% from a yr ago, its lowest annual increase since January and a slowdown from the 8.2% annual pace within the prior month. Economists were expecting increases of 0.6% and seven.9%, in accordance with Dow Jones. Excluding volatile food and energy costs, so-called core CPI increased 0.3% for the month and 6.3% on an annual basis, also lower than expected.
Treasury yields plunged after the CPI report, with the 10-year Treasury yield falling greater than 18 basis points to three.946% as traders bet the Federal Reserve would slow its aggressive tightening campaign that is weighed on markets all yr. The yield on the 2-year Treasury dropped greater than 23 basis points to 4.395% (1 basis point equals 0.01%). The U.S. Dollar, one other recent pressure point for stocks, tumbled to its worst day since 2015 vs. a basket of other currencies.
“Rates of interest are still running every thing in markets,” said Exencial Wealth’s Tim Courtney. “With today’s CPI number coming down, the market is now betting pretty clearly that they think the rate of interest [rises] are coming near an end. So, you see those rate of interest sensitive stocks doing really, rather well.”
Tech stocks which have been hardest hit by the rise in inflation and surging rates of interest led the gains Thursday. Shares of Amazon were up 13%. Apple, Meta and Microsoft were each up greater than 6%. Shares of Meta were up 5.4%. Tesla jumped 5.3%.
Semiconductor stocks got a lift too, with shares of Lam Research and Applied Materials each up greater than 5%. KLA also popped 3.7%.
Thursday’s advance rekindled the comeback rally that began in mid-October but stalled in recent weeks. The Dow touched its highest since August on Thursday and the S&P 500 rose above the three,900 level, which has been key resistance for the market.