U.S. stocks were off session highs Thursday afternoon, but the S&P 500 index and Nasdaq Composite remained on track to log their biggest one day rise in two years on a day that saw the Dow soar more than 1,000 points after data suggested inflation may be peaking.
The Nasdaq was on track for its biggest gain on any day the CPI was released in the history of the data series, while the S&P 500 was headed for its best CPI-day performance since December 2008.
Falling Treasury yields and a softer dollar, driven by expectations that the Federal Reserve might opt for a smaller interest-rate hike in December, also helped to boost stocks, market analysts said. The move in Treasurys was enough to leave the 10-year yield on track for its biggest daily drop since 2009, while the dollar saw notable moves against the euro and yen.
What’s going on
- The S&P 500 SPX, +4.71% rose 150 points, or 4%, to 3,899.
- The Dow Jones Industrial Average DJIA, +3.20% climbed 805 points, or 2.5%, to 33,311.
- The Nasdaq Composite COMP, +27.30% advanced 576 points, or 5.6%, to 10,929.
Thursday’s move higher in stocks helped the S&P 500 and Nasdaq Composite erase all the losses from Wednesday’s session, catapulting them back into the green for the week. Wednesday’s drop, which came after three days of consecutive gains, marked the biggest post-election day pullback since 2012, according to Dow Jones Market Data.
What’s driving markets
U.S. stocks rocketed higher after the release of the consumer price inflation figures on Thursday and kept climbing, pushing all three major benchmarks to their biggest intraday gains since 2020.
Headline inflation retreated on a year-over-year basis to 7.7% while the year-over-year core number declined to 6.3%. On a month-over-month basis, headline inflation came in at 0.4%, while core inflation softened to 0.3%.
See: U.S. inflation has come off the boil, but it’s going to take a lot longer to cool down
The CPI report was “exactly the kind of confidence the market needed to re-instill the risk-on environment that had started last Friday,” said Art Hogan, chief market strategist at B.Riley Wealth. U.S. stocks had rallied for three straight sessions before Wednesday’s wipeout, which was the worst post-election day performance for the major U.S. indexes on a percentage-point basis since 2012.
“What’s important about all this is we had some very important events this week and both played out in a favorable way for markets,” Hogan added, a reference to both the inflation data and the expectation that Republicans will control the House once all the votes are tallied from Tuesday’s midterms.
Shortly after the data were released, the Wall Street Journal’s Nick Timiraos reported that the October report “is likely to keep the Fed on track to approve a 50-basis-point interest-rate increase next month.”
Fed funds futures traders were pricing in higher than 80% of a 50 basis point rate hike in December, compared with below 60% odds one day earlier, compared with the CME’s FedWatch tool.
Several senior Federal Reserve officials delivered public remarks on Thursday, including Philadelphia Fed President Patrick Harker, who said the Fed will slow down the pace of interest rate hikes in the coming months. Fed President Mary Daly also said the Fed should still raise its benchmark interest rate slightly above a 4.5%-4.75%
The yield on the 10-year Treasury note TMUBMUSD10Y, 3.859% retreated below 4%, helping to drive stocks higher, falling 30 basis points to 3.849%, on track for its biggest daily drop since March 18, 2009, according to DJMD.
The ICE U.S. Dollar Index DXY, -1.92% was off 2% at 108.35 in recent trade as the euro rose to its highest level against the buck in roughly two months. The dollar USDJPY, -2.99% was also on track for its biggest daily pullback against the yen since 2016, falling 3.1% to 141.92 yen to a buck.
While equity investors were clearly pleased with the October inflation data, one economist noted that the CPI report won’t be the last important inflation-related reading of the week.
“Markets are applauding the cooler inflation print and expectations for a downdraft in rates has begun with expectations for the December 14th rate hike anchored at 50 basis points,” said Quincy Krosby, chief global strategist for LPL Financial.
“Still, markets need to absorb Friday’s University of Michigan’s Consumer Sentiment Survey that includes consumer 5-10 year consumer inflation expectations, which has climbed to an uncomfortable 2.9%.”
All 30 components of the Dow were trading in the green Thursday, led by Salesforce Inc. CRM, +8.59% and Microsoft Corp. MSFT, +6.71% All 11 S&P 500 sectors were also trading in the green, with at least half a dozen sectors on track for their biggest one-day gain since April 2020.
Investors will also need to digest the November CPI report, due early next month, before the Federal Reserve meets again to decide the size of the next rate hike.
In other markets, Bitcoin BTCUSD, +10.18% was recovering some ground early Thursday after falling to its lowest level since 2020 this week on expectations that FTX and its related companies might be headed for insolvency. The price of bitcoin was up 5% in the last 24 hours according to $17,449 per coin as of early Thursday.
Single-stock movers
- The modest rebound in the price of bitcoin and other cryptocurrencies was helping to lift some crypto-linked stocks on Thursday. MicroStrategy Inc. MSTR, +4.39%, Riot Blockchain Inc. RIOT, +7.04% and Coinbase Global Inc. COIN, +10.48% were all up sharply.
- SVB Financial Group SIVB, +11.63% shares rose 12.6%.
- T Rowe Price Group Inc. TROW, +13.88% was among the biggest gainers on the S&P 500, up more than 13%.
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