S&P 500, Nasdaq build on biggest stock rally since 2020

Stocks extended this week’s dramatic climb on Friday after the deceleration in CPI inflation data sparked Wall Street’s deepest rally since early 2020.

The S&P 500 (^GSPC) rose 0.9%, notching its biggest winning week since June, while the technology-heavy Nasdaq Composite (^IXIC) gained 1.9%. The Dow Jones Industrial Average (^DJI) closed modestly higher, up 0.1%, lagging behind the other indexes.

All three major averages skyrocketed Thursday, each recording their biggest one-day advances since a rebound from the troughs of the COVID crash more than two years ago. Outsized moves were catalyzed by lighter October consumer price data that fueled bets the Federal Reserve could stop tightening financial conditions as soon as early next year. The S&P 500, Dow and Nasdaq soared by 5.5%, 3.7% – or 1,200 points – and 7.4% respectively.

On Thursday, Treasury yields and the U.S. The bond market was closed for Veteran’s Day Friday.

A reversal in China’s zero-COVID policy to reduce the amount of time travelers to the country spend in quarantine boosted sentiment in early trading. Oil markets advanced as traders speculated the move could cause a boost to commodity demand, with West Texas Intermediate (WTI) futures bouncing nearly 3% to above $88 a barrel.

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Meanwhile on the economic data front, the preliminary reading from the University of Michigan on its consumer sentiment survey for November fell to 54.7 from. 59.9 in October, the lowest since July.

“Overall, the report suggests that peak inflation may finally be behind us, although inflation may remain high for a while,” said BNY Mellon Investment Management’s head of U.S. equities. it. Macro Sonia Meskin in a comment Thursday.

She noted that the figure supports the smaller 0.50% rate increase for December telegraphed at this month’s FOMC meeting, which investors are pricing in.

“However, it is also important not to overemphasize one report for inflation and policy trajectory,” she added.

The Consumer Price Index (CPI) in October rose by an annual 7.7% and increased 0.4% over the month. On a “core” basis, which strips out the volatile food and energy components of the report, prices rose at a clip of 6.3% year-over-year and 0.3% on a monthly basis.

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Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a Federal Open Market Committee meeting, at the Federal Reserve Board Building in Washington, DC, on November 2, 2022. Court, with its move to cool red-hot inflation taking on more weight among The political maelstrom ahead of key US  it.  Midterm elections.  The latest three-quarter percentage point increase takes the benchmark lending rate to 3.75-4.0 percent, the highest since January 2008. (Photo by Mandel NGAN/AFP) (Photo by MANDEL NGAN/AFP via Getty Images)

Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a Federal Open Market Committee meeting on November 2, 2022. (Photo by MANDEL NGAN/AFP via Getty Images)

Despite the moderation, many strategists contend that excitement is premature, with Federal Reserve officials still poised to tighten after Chair Jerome Powell said last month that policymakers still had “some way to go” to restore price stability — a message that his central bank colleagues Have since then also echoed in a series of public speeches.

“The Fed’s extreme data dependence, combined with the fact that economic data will only show the real-time labor market and inflation slowdown with a lag, increases the odds of an overtightening accident,” said Gregory Dako, EY Parthenon chief economist at E – Letter comments. .

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Meanwhile, Nicholas Colas of DataTrek points out another fact: Although inflation trends lower when it peaks and starts to decline – as seen in 1970, 1974, 1980, 1990, 2001, and 2008 – that downshift typically comes with recessions, and there are no Recessions. Exceptions to the rule.

Turmoil persisted in the cryptoworld as the FTX debacle unraveled and the company announced Friday morning that it was filing for bankruptcy. Fallen crypto hero billionaire Sam Bankman-Fried has also stepped down as CEO and is reported to be under investigation by the US. it. Securities and Exchange Commission as its exchange seeks a cash bailout. Bitcoin is trading around $16,500 Friday morning.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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