Dow up 1,200 as Wall Street has its best day in two years as cooling inflation gives investors hope the Fed will slow its rate hikes
- Wall Street Soared Thursday, Pointing to Best Session in Two Years
- It was the best day for major US stock indices since April 2020
- Surge follows latest inflation report showing relief from rising prices
- Investors hope the Fed will slow the pace of rate hikes
Wall Street rose Thursday to record its best session in two years after a new report showed US inflation is cooling faster than expected.
At the closing bell, the Dow Jones Industrial average rose 1,201 points, or 3.7 percent, to 33,715. The S&P 500 shot up 5.54 percent and the Nasdaq shot up 7.35 percent.
It marked the best day of major stock indices since April 2020, as markets rose furiously in a slight recovery from the COVID-19 pandemic crash.
Thursday’s staggering gains followed the latest consumer price index report showing that annual inflation fell for the fourth straight month in October, leading investors to hope the Federal Reserve will slow the pace of its aggressive rate hikes.
A five-day view of the Dow shows the index rising in a strong session on Thursday
Thursday’s staggering gains followed the latest consumer price index report showing that annual inflation fell for the fourth straight month in October.
Inflation hit a four-decade high of 9.2 percent in June, and the Fed is trying to tame rising prices by raising borrowing costs to slow the economy.
The October CPI report showed inflation at 7.7 percent, less than economists had expected, raising hopes that the Fed will slow its rate hikes before the economy plunges into a sharp downturn.
Still, some investors warned that the inflation risk to the economy has not completely disappeared.
“Overall, this was a good report that reinforces the idea that inflation has peaked and is falling, but there is still no evidence that we are returning to the 2 percent target in the near term,” said Carlo Putti. , investment director at M&G Investments.
“Inflation has shifted from the core to the service sector, which is very clingy and mainly driven by wages. We need to see more evidence that wage inflation is cooling before we can get more comfortable with inflation,” he added.
The October CPI report showed inflation at 7.7 percent, less than economists had expected, raising hopes that the Fed will slow its rate hikes
Slower inflation could divert the Fed from its most aggressive path in raising interest rates. The US central bank raised all of its key interest rates to a range of 3.75 to 4 percent, from virtually zero in March.
Big Tech stocks, which have suffered the most from tighter credit conditions, were some of the biggest winners on Wall Street after the new inflation report.
Apple was up 7.2 percent and Microsoft was up 6.7 percent, while Amazon was up 11.2 percent.
Tesla also rose nearly 4.6 percent, though it has fallen by about half since CEO Elon Musk announced in April that he was Twitter’s largest shareholder.
Investors fled the electric vehicle maker fearing Musk would be distracted by Twitter, and he has since sold more than $19 billion worth of Tesla stock.
On Thursday morning, Wedbush analyst Dan Ives removed Tesla from the company’s “Best Ideas List.”
The Nasdaq composite, which is heavy with tech-focused stocks, is heading for its best day since spring 2020
The broader S&P 500, which is at the heart of many 401(k) retirement accounts, is also
Ives said in a note that Musk’s $44 billion Twitter takeover has become an “albatross” that “may begin to affect the Tesla brand.”
The Nasdaq composite, which is heavy with technology-oriented stocks, is heading for its best day since the spring of 2020, when Wall Street was in the midst of its frenzied recovery from the crash caused by the coronavirus.
So is the broader S&P 500, which is at the heart of many 401(k) retirement accounts.
Homebuilders and other housing companies were also strong in hopes that the Fed would slow down with rate hikes that have already sent mortgage rates to punishing levels.
Lennar and PulteGroup both rose nearly 13 percent for some of the biggest gains in the S&P 500.