Dow gains 1,200 points and Nasdaq surges 7% in blistering rally following October CPI report
- US stocks soared as much as 7% on Thursday after a cool CPI report sparked hopes of a Fed pivot.
- US inflation was up 7.7% year-over-year in October, below the average economist estimates of 7.9%.
- The 10-year US Treasury yield plunged 31 basis points and the US dollar Index fell more than 2%.
US stocks soared as much as 7% early Thursday after the October consumer price index showed a cooldown in inflation, giving the Federal Reserve some breathing room in its current interest rate hiking cycle and sparking hopes of a Fed pivot.
The Nasdaq closed an eye-popping 7.35% higher, and the Dow Jones Industrial Average spiked nearly 1,200 points. The S&P 500 was up by more than 5.5%.
The CPI rose 7.7% on an annual basis, below economist estimates for a rise of 7.9%. On a monthly basis, it climbed 0.4% in October, below estimates for a rise of 0.6%. Meanwhile, core monthly inflation, which excludes food and energy, increased 0.3%, below estimates for a rise of 0.5%.
The move in assets was immediate following the CPI release, with the 10-year US Treasury yield plunging an immediate 20 basis points, eventually falling 31 basis points. Meanwhile, the US Dollar Index plunged more than 2%, it's weakest day in more than 10 years.
"Having the dollar pull back from its parabolic rise against major currencies supports multinational corporations that have been whipsawed by the strong dollar as they compete for international business," LPL's Quincy Krosby told Insider.
Today's move was not a big surprise to JPMorgan, which estimated a CPI reading of 7.7% would spark a 2.5%-3.5% surge in the S&P 500.
Here's where US indexes stood at the 4:00 p.m. ET close on Thursday:
- S&P 500: 3,955.88, up 5.53%
- Dow Jones Industrial Average: 33,712.21, up 3.69% (1,198.27 points)
- Nasdaq Composite: 1,198.27, up 7.35%
"Hard to believe that a 7.7% year over year inflation rate is reason for celebration, but the 0.3% monthly change in core CPI reduces pressure on the Fed to raise rates another 0.75% at their next meeting," Bryce Doty of Sit Fixed Income Advisors told Insider.
Here's what else is happening this morning:
- Jeremy Siegel told CNBC that the stock market is poised for a significant year-end rally because "inflation is basically over."
- Paul Krugman said the cool inflation report signaled that it is increasingly possible that the US economy could stick a soft landing.
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- JPMorgan said the FTX fiasco could spark a 25% price decline in bitcoin to $13,000 as trust in the industry is shaken to its core.
- Sam Bankman-Fried broke his silence days after the FTX implosion, launching a tweet-storm that addressed some aspects of the failure, but not all.
- Tesla was removed from Wedbush's best ideas list as CEO Elon Musk focuses his attention on Twitter and sells more of his Tesla shares.
In commodities, bonds and crypto:
- West Texas Intermediate crude oil rose 0.47% to $86.23 per barrel. Brent crude, oil's international benchmark, rallied 0.82% to $93.41.
- Gold rose 2.53% to $1,757 per ounce.
- The yield on the 10-year Treasury plunged 31 basis points to 3.83%.
- Bitcoin rose 9.78% to $18,069, while ether jumped 12.95% to $1,325.
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