Dow climbs 1,000 points after government report signals decline in US inflation

A government report revealed that the U.S. Excitement swept Wall Street on Thursday after inflation has come down Last month even more than economists expected.

The S&P 500 jumped 208 points, or 5.6%, to end at 3,956. The Dow rose 1,201 points, or 3.7%, to 33,715 and the tech-heavy Nasdaq climbed 7.4%. Treasury yields fell dramatically as bond markets eased.

Even bitcoin soared, retracing some of its sharp decline from the past days due to the latest crisis in the crypto industry’s confidence. A slowdown in inflation could mean that the Federal Reserve will not be so aggressive about raising interest rates. Such increases have been the main cause of Wall Street trouble this year and are threatening a recession.

The yield on the 10-year Treasury, which helps set rates for mortgages and other loans, fell to 3.93% from 4.10% late Wednesday.

All moves stemming from the Consumer Price Index (CPI) show that inflation slowed to 7.7% compounded last month from 8.2 per cent in September. This is the fourth month in a row since inflation peaked at 9.1% in June, and it was a better reading than the 8% that economists were expecting.

core inflation slow

Inflation also slowed more than expected, ignoring the effects of food and energy prices. This is the measure the Fed pays more attention to. So inflation happened between September and October.

“The inflation rate for the month is more informative,” said Brian Jacobsen, senior investment strategist at AllSpring Global Investments. “On that measure, inflation is still high, but not scary high.”

Slow inflation could keep the Fed away from the most aggressive path of raising interest rates. already raised its prime lending rate In March it rose from near zero to a range of 3.75% to 4%.

Federal Reserve hikes interest rates by 0.75 percent


hiking to continue

While the data was an encouraging sign, analysts cautioned against assuming that the fight against inflation is over.

“The Fed is still on track to increase the fed funds rate by 0.50% on December 14th,” Jeffrey Roach, chief economist at LPL Financial, said in an email. “However, in the near term, investors should respond favorably to these encouraging moves in consumer prices.”

Mike Lowengart, head of model portfolio construction at the Morgan Stanley Global Investment Office, also warned investors not to shy away from game-changing reports.

“The Fed was adamant that it would not put the brakes on rate hikes until inflation slowed, and while the market rally indicates investors may see the light at the end of the tunnel, it should be pushed back to next month. Will get one more reading before his decision.” They said. “Remember that even when we see bearishness, prices remain high and there is a long way to go before they return to normal.”

The reaction of the stock market in the mid-term elections


Another potentially market-shaking report will hit Wall Street on Friday, when the latest reading comes in how much inflation American households expect to see in future years. Fed Chairman Jerome Powell has said he is paying particular attention to such expectations.

One of the reasons the Fed is so aggressive about hiking rates is that it wants to avoid a vulnerable cycle where higher inflation expectations lead people to change their behavior which makes inflation even higher. .

Shares have risen sharply this week, with a number of factors pushing the market up and down. Investors expect Tuesday Election may result in a Washington where Control is divided between Democrats and Republicans, It could avert the kind of macroeconomic changes that plague investors, but the outlook for it is still uncertain as votes are still being counted.

“Today’s CPI report, indicating that inflation is heading in the right direction, does not suggest that inflation has exited the broader economy. And it does not suggest that the Fed’s work to restore price stability is complete. It’s done,” Quincy Crosby, chief global strategist at LPL Financial, said in an email.

“Rather, it reinforces the case that if inflation continues to trend downward, the Fed could reach its terminal rate in the first quarter of 2023 with smaller rate hikes,” he said.

FTX Flameout

Meanwhile, huge losses were brewing in the crypto world, threatening to spread to other markets and at least undermine trust among investors. Bitcoin was below $16,500 shortly before the inflation report, up from around $20,000 a week ago and around $69,000 a year ago. Within half an hour it quickly jumped to $1,000 and then came back to around $17,400.

The crypto market collapses as Binance withdraws from the FTX deal


Much of this week’s uproar for crypto has focused on one of the big trading exchanges, FTX, where the industry’s latest trust crisis has left customers scrambling to withdraw their money. A sharp drop in crypto prices could trigger an even sharper decline because of how much money many crypto investors have borrowed to trade, which can exacerbate market movements.

According to strategists at JPMorgan, the lender gives those investors more collateral, something called a margin call, and the process can take weeks to complete. According to strategists, a challenge for the market is the dwindling number of big, financially strong players outsmarting the weak.

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