- US stocks surged more than 2% in a wild trading session after September's CPI report doubled expectations at 0.4% month-over-month.
- The September inflation report poured cold water on hopes that the Fed will pivot away from its interest rate hikes anytime soon.
- Fed Fund Futures are now pricing in a 75 basis point rate hike in both November and December.
US stocks soared more than 2% on Thursday, recovering from an initial decline of more than 2% after September's CPI report showed inflation continues to hit levels not seen in four decades.
The S&P 500 was down 2.4% at its low for the day, before it recovered all of those losses and surged as much as 3%. The Dow Jones Industrial Average saw a 1,500 point intraday swing.
The reversal came after the S&P 500 tested 3,500, briefly hitting a low of 3,491. The 3,500 level represents a 50% retracement of the March 2020 low at about 2,200 and the January high of about 4,800.
Month-over-month inflation hit 0.4%, double the expectation for a rise of just 0.2%. CPI rose 8.2% year-over-year, which was above estimates for a rise of 8.1%. Even when excluding food and energy prices, CPI rose 0.6% month-over-month, which was ahead of estimates for a rise of 0.4%.
The hot CPI report erased all hopes that the Fed will soon pivot away from its aggressive rate hikes anytime soon. The Fed is now expected to hike interest rates 75 basis points in both November and December, according to the CME FedWatch Tool.
The shock CPI report erased early morning gains in the market, as the S&P 500 was briefly up about 1% after the UK government signaled a policy reversal of its proposed tax cut plans. However, the massive rally kicked off not long after the open, with the Dow up by more than 600 points by 11:30 a.m.
Here's where US indexes stood at the 4:00 p.m. ET close on Thursday:
- S&P 500: 3,669.86, up 2.6%
- Dow Jones Industrial Average: 30,038.06, up 2.83% (827.21 points)
- Nasdaq Composite: 10,649.15, up 2.23%
Here's what else happened today:
- Deep oil output cuts by OPEC+ have elevated prices and could tip the global economy into recession, the International Energy Agency said on Thursday.
- OPEC is expecting oil demand to fall as the global economic outlook worsens, with fresh COVID-19 shutdowns in China a key concern.
- A potential threat to a large Norwegian natural gas plant sent jitters through European energy markets Thursday, as the continent frets about suspected Russian interference in its infrastructure.
- The pound soared Thursday following reports the UK government is discussing a potential pullback from parts of its mini-budget, an economic growth plan that was met with market turmoil after its introduction last month.
- Wharton professor Jeremy Siegel warned the Fed could send the economy into a depression if it waits for core inflation to fall back to 2% before ending its monetary tightening policies.
In commodities, bonds and crypto:
- West Texas Intermediate crude oil rose 2.06% to $89.07 per barrel. Brent crude, oil's international benchmark, jumped 2.26% to $94.49.
- Gold fell 0.41% to $1,670.70 per ounce.
- The yield on the 10-year Treasury jumped 5 basis points to 3.95%.
- Bitcoin rose 1.45% to $19,366, while ether rose 0.09% to $1,287.