- US stocks saw an impressive rally as the latest CPI data surprised investors with an inflation slowdown.
- Markets are betting that this is enough to stop Fed interest hike in December.
US stocks shot up on Tuesday, as markets rallied around October's Consumer Price Index report, which surprised investors with softer-than-predicted inflation data.
The Dow Jones Industrial Average surged 489 points, while the S&P 500 and Nasdaq rose 1.9% and 2.4% respectively.
That's as last month's soft inflation bolsters hopes that the Federal Reserve may be done with its rate hiking campaign, and strengthens the chances that the US economy can avoid a recession. Since the CPI report, market expectations of rate hike in December dropped from 14% to 0%, according to the CME FedWatch Tool.
"The inflation fever has broken in the United States," Bill Adams, Chief Economist for Comerica Bank reacted, adding: "October's cooler than expected CPI report keeps the Fed on course for rate cuts in 2024."
According to October's report, prices remained flat on a monthly basis, despite expectations of a 0.1% rise. The annual rate cooled to 3.2% from September's 3.7%, falling under 3.3% forecasts.
Core inflation was also lower than expected at 4%.
The news also sent Treasury yields tumbling, with the 10-year bond plunging almost 20 basis points to 4.439%. Just last month, the fear of interest rate hikes helped drive yields on long-dated US debt to nearly multi-decade highs, breaking the 5% threshold.
"The CPI data confirm what everyone already knew—inflation is on the decline in a meaningful way. The question now for the Fed is whether they continue to believe that slowing the economy into recession is needed to completely conquer inflation," Jamie Cox, Managing Partner for Harris Financial Group, said.
Here's where US indexes stood at the 4:00 p.m. closing bell on Tuesday:
- S&P 500: 4,495.70, up 1.91%
- Dow Jones Industrial Average: 34,827.70, up 1.43% (+489.83 points)
- Nasdaq Composite: 14,094.38, up 2.37%
Here's what else is happening today:
- The drop in inflation was a "game changer" that will drive the Fed to cut rates, PIMCO's chief economist said.
- A fake BlackRock ETF boosted the XRP token as much as 13% before crashing.
- Stock market gains helped Nvidia add $220 billion to its value just this month.
- The US sent notices to oil firms in 30 countries for possible violations of the Russian oil price cap.
- Investors are overweight on bonds at a level not seen since 2009.
In commodities, bonds, and crypto:
- West Texas Intermediate crude edged higher to $78.28 a barrel. Brent crude, the international benchmark, was nearly flat at $82.50 a barrel.
- Gold rose 0.9% to $1,967.20 per ounce.
- The 10-year Treasury yield plummeted 19.6 basis points to 4.436%.
- Bitcoin dropped 3.4% to $35,408.