Wall Street stocks jumped on Tuesday after the government issuedShowing that inflation last month was at its lowest level of 2022.
The Dow rose 550 points, or 1.6%, to 34,554. The S&P 500 rose 2.5% and the tech-heavy Nasdaq rose 3.7%.
The government said this on TuesdayFrom a year ago, down from 7.7% in October and most recently a peak of 9.1% in June. It was the fifth straight recession and investors enjoyed the news, immediately sending markets higher ahead of the open as the Federal Reserve got ready to hold its final policy meeting of 2022.
“Santa is finally coming. Given the better-than-expected inflation data this morning, year-over-year numbers coming in lower than expected and month-over-month numbers slowing down considerably, markets are bound to rally. The green light is at the end of the year,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said in an email.
is in the marketsThanks to high inflation and interest rate hikes to combat it. Higher rates slow business activity by design, but also run the risk of a recession if they go too high, while pulling down investment prices.
Policymakers at the Federal Reserve began a meeting on Tuesday. When it ends on Wednesday, investors expect the central bank to announce its last interest rate hike of the year. Wall Street expects a half-point hike by the Fed, lessThe Fed has issued at its last four meetings.
Each of them was triple the Fed’s usual move, and they raised the central bank’s key overnight rate from 3.75% to 4%. It started the year virtually from scratch.
Goldman Sachs economists expect Fed policymakers on Wednesday to eventually raise their median expectations to a range of 5% to 5.25%.
Even if inflation is coming down, the global economy still faces threats from rate hikes. The housing industry and other businesses that rely on low interest rates have shown particular weakness, and concerns are growing about the strength of corporate profits broadly.
In addition to raising short-term rates, the Fed is also taking other steps with its massive stockpile of bond investments, which should effectively allow longer-term yields to rise.
Other central banks around the world, including the European Central Bank, are also likely to raise their rates by half a percentage point this week.
The yield on the 10-year Treasury, which helps set rates for mortgages and other loans, fell to 3.48%. The two-year yield, which more closely tracks expectations for the Fed, fell to 4.2% from 4.34%.
US benchmark crude rose $1.36 to $74.53 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the pricing base for international trade, rose $1.52 to $79.51 a barrel.
Last week, crude oil prices hit their lowest levels in years on concerns about a weakening global economy that would mean less energy demand.