Tamer Than Expected Inflation Data Ignites Rally On Wall Street

With tamer than expected inflation data generating considerable buying interest, stocks showed a substantial move to the upside during trading on Tuesday. The major averages all moved sharply higher after ending Monday’s trading narrowly mixed.

The major averages pulled back off their highs of the session going into the close but still posted strong gains. The Nasdaq soared 326.64 points or 2.4 percent to 14,094.38, the S&P 500 surged 84.15 points or 1.9 percent to 4,495.70 and the Dow jumped 489.83 points or 1.4 percent to 34,827.70.

The tech-heavy Nasdaq reached its best closing level in over three-months, while the Dow and the S&P 500 set new two-month closing highs.

The rally on Wall Street came following the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of October.

The Labor Department said its consumer price index was unchanged in October after climbing by 0.4 percent in September. Economists had expected consumer prices to inch up by 0.1 percent.

Excluding food and energy prices, core consumer prices edged up by 0.2 percent in October after rising by 0.3 percent in September. Core prices were expected to rise by another 0.3 percent.

The report also said the annual rate of consumer price growth slowed to 3.2 percent in October from 3.7 percent in September. Economists had expected the pace of growth to decelerate to 3.3 percent.

Core consumer prices were up by 4.0 percent compared to the same month a year ago, reflecting the smallest year-over-year increase since September 2021.

The annual rate of core consumer price growth was expected to come in unchanged from 4.1 percent in the previous month.

Michael Pearce, Lead U.S. Economist at Oxford Economics, said the slowdown in core price growth should “give Fed officials more confidence that inflation is on a firm downward trajectory, staying its hand for rate hikes.”

Treasury yields moved sharply lower following the release of the report, adding to the buying interest on Wall Street.

Sector News

Airline stocks moved sharply higher over the course of the trading session, with the NYSE Arca Airline Index soaring by 6.7 percent to its best closing level in a month.

Substantial strength was also visible among housing stocks, as reflected by the 5.5 percent spike by the Philadelphia Housing Sector Index. The index jumped to a three-month closing high.

Interest rate-sensitive commercial real estate stocks also saw considerable strength, resulting in a 5.4 percent surge by the Dow Jones U.S. Real Estate Index.

Gold, networking, banking and utilities stocks also moved significantly higher, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index and China’s Shanghai Composite Index rose by 0.3 percent, while South Korea’s Kospi jumped by 1.2 percent.

European stocks also showed strong moves to the upside on the day. While the German DAX Index spiked by 1.8 percent, the French CAC 40 Index surged by 1.4 percent and the U.K.’s FTSE 100 Index edged up by 0.2 percent.

In the bond market, treasuries moved sharply higher in reaction to the consumer price inflation data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 19.1 basis points to 4.441 percent.

Looking Ahead

Economic data is likely to remain in focus on Wednesday, with traders likely to keep a close eye on reports on retail sales, producer prices and New York manufacturing.

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