Wall Street rallies as inflation data spurs hopes that Fed will break the table

Wall Street rallies as inflation data spurs hopes that Fed will break the table

After consumer prices rose less than expected in October, the main indexes of Wall Street rallied, leading to a rally in the tech-heavy Nasdaq on Thursday, spurring hopes that the Fed might scale down its future rate hikes.

The S&P 500 and the Nasdaq were set to make their biggest percentage gain since April 2020, as the data pointed out that inflation was beginning to subside, with the annual number below 8% for the first time in eight months.

Mike Zigmont, head of trading and research at Harvest Volatility Management said that it is very good news for future Fed policy and indicates that what the Fed has been doing has been appropriate. It takes off the table the risk that the Fed will have to overtighten and break the economy. Inflation data prompted traders to adjust their rate hike bets, with odds of a 50 basis point rate hike in December jumping to more than 80% from 52% before the data was released.

Another set of data shows that the number of Americans filing new claims for unemployment benefits increased moderately last week, signalling that job growth is slowing.

Wall Street's fear gauge, known as the CBOE volatility index, fell to a near two-month low of 23.4 points.

Wall Street's main indexes suffered sharp losses this year due to investors fearing the U.S. central bank's aggressive rate hikes to tame decades-high inflation will lead to the economy going into a recession. On a year-to-date basis, the S&P 500 is still down 18.3%, on course for its worst annual performance since 2008.

As Treasury yields fell, growth and technology-related stocks gave a boost to the markets on Thursday.

Market heavyweights such as Nvidia, Microsoft, Apple, Amazon.com, Meta Platforms and Tesla rose between 6.0% and 10.1%.

According to a media report, Amazon was looking at unprofitable business units, including the devices unit, to cut costs.

The Dow Jones Industrial Average was up 820.97 points, or 2.52%, at 33,334. The S&P 500 was up by 149.48 points, or 3.99%, at 3,898 at 91. 05, and the Nasdaq Composite was up 553.42 points, or 5.35%, at 10,906. The PHLX Housing index jumped 10.3% to its highest level in two months after getting battered this year because of concerns about higher rates that hurt affordability.

Rivian Automotive rose by 13.8% after the electric-vehicle maker reported a smaller-than expected loss, higher number of preorders and reaffirmed its full-year production outlook.

The Republicans edged closer to securing a majority in the U.S. House of Representatives while control of the Senate was affected by a few tight races, two days after Democrats staved off an anticipated red wave of Republican gains in midterm elections.

The Advancing issues outnumbered decliners for a 11.59 to 1 ratio on the NYSE and a 5.60 to 1 ratio on the Nasdaq.

The S&P index recorded 13 new 52 week highs and no new lows, while the Nasdaq recorded 70 new highs and 93 new lows.