Inflation slowdown triggers a stock surge
Wall Street soared Thursday to its best day in more than two years as exhilaration swept through markets after a report showed inflation in the United States eased last month even more than expected.
The Standard & Poor’s 500 index surged 5.5%, the Dow Jones industrial average leaped 1,200 points and the Nasdaq composite packed what could be a year’s worth of gains into one day by roaring 7.4% higher.
Prices jumped for metals, European stocks and other investments as investors took the data as a sign that the worst of high inflation may finally have passed, though analysts cautioned it’s still premature to declare that with certainty. Even bitcoin clawed back some of its steep plunge in recent days.
Some of the most dramatic action was in the bond market. The yield on the 10year Treasury, which helps set rates for mortgages and other loans, fell to 3.82% from 4.15%. The two-year yield, which more closely tracks expectations for Fed action, fell to 4.32% from 4.62% and was on pace for its sharpest fall since 2008.
All the action stemmed from a U.S. government report showing that inflation slowed in October for a fourth straight month since hitting a peak of 9.1% in June. The reading of 7.7% was better than the 8% economists were expecting.
Perhaps more important, inflation also slowed more than expected after ignoring the effects of food and energy prices. That’s the measure the Fed pays closer attention to. Inflation between September and October also eased.
“The month-on-month rate of inflation is much more informative,” said Brian Jacobsen of Allspring Global Investments. “On that measure, inflation is still high, but not scary high.”
Slower inflation could keep the Fed off the most aggressive path in raising interest rates. It’s already boosted its key rate to a range of 3.75% to 4%, up from virtually zero in March.
Big tech stocks were some of Wall Street’s most buoyant forces after the report. Apple rose 8.9%, Microsoft climbed 8.2% and Amazon soared 12.2%.