Stocks soared as relief swept through Wall Street following a report indicating a cooling of U.S. inflation. In early Tuesday trading, the S&P 500 climbed 1.4%, reaching near its highest point in two months. The Dow surged by 375 points, and the Nasdaq composite experienced a 1.8% rise. The much-anticipated report revealed a slowdown in overall inflation for the last month, boosting trader confidence that the Federal Reserve might conclude its interest rate hikes. High-growth stocks, particularly in the technology sector, led the upward trend, with Advanced Micro Devices rising by 3.3%. The 10-year Treasury yield sharply declined to 4.48%.
Wall Street responded positively to the encouraging news on inflation, with futures for the Dow Jones industrials rising by 1.1%, and the S&P 500 edging 1.4% higher. President Joe Biden is scheduled to meet with Chinese leader Xi Jinping during a Pacific Rim summit in California, marking their first face-to-face encounter in a year.
In corporate developments, Home Depot shares received a modest boost after surpassing Wall Street forecasts, although the home improvement chain narrowed its full-year outlook. The company cited consumer hesitancy to purchase high-ticket appliances, often acquired on credit, due to the increased costs resulting from the U.S. Federal Reserve’s efforts to curb inflation. Target, Macy’s, and Walmart are set to report later in the week.
The report from the Labor Department showed a slowdown in overall inflation, remaining unchanged from September to October, down from the 0.4% increase the previous month. Year-on-year, consumer prices rose by 3.2% in October, compared to 3.7% in September. Despite the Federal Reserve’s interest rate hikes, the U.S. economy has remained robust.
Investors are closely monitoring whether the cooling trend in prices will persist amid concerns about the resilience of growth following the rate hikes. The hope is that inflation will continue to decline from its peak of over 9% in the summer of 2022, potentially influencing the Federal Reserve to forgo further rate hikes and even consider cutting interest rates.
Internationally, France’s CAC 40 edged up 0.1%, Germany’s DAX gained 0.4%, and Britain’s FTSE 100 fell 0.5%. In Asian trading, Japan’s Nikkei 225 gained 0.3%, Australia’s S&P/ASX 200 advanced 0.8%, South Korea’s Kospi added 1.2%, Hong Kong’s Hang Seng lost nearly 0.2%, and the Shanghai Composite edged up 0.3%.
Stephen Innes, managing partner at SPI Asset Management, noted positive geopolitical sentiments among Asian investors as they awaited U.S. inflation figures and anticipated talks between the U.S. and China. China is set to release monthly economic indicators, and Japan will announce its latest growth numbers.
U.S. budget politics also took center stage, with the House of Representatives preparing to vote on a stopgap package to avoid a federal shutdown and keep the government running into the new year. In other markets, U.S. crude oil lost 18 cents to $78.15 a barrel, and Brent crude fell 14 cents to $82.38 a barrel. The U.S. dollar slightly dipped in currency trading, reaching 151.70 Japanese yen, while the euro rose to $1.0721. On Monday, Wall Street saw a mixed finish, with the S&P 500 slipping 0.1%, the Dow gaining 0.2%, and the Nasdaq composite falling 0.2%.
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