Wall Street surged on Thursday, with the Nasdaq up over 6% as a sign of slowing inflation in October sparked speculation that the Federal Reserve might scale back its aggressive interest rate hikes.
The S&P 500 (.SPX) and Nasdaq (.IXIC) were on track for their biggest daily percentage gain since April 2020 as the latest consumer price data cheered investors worried that ongoing interest rate hikes could hobble the U.S. economy.
One-time Wall Street darlings tarnished in 2022’s bear market were among Thursday’s strongest performers, with Nvidia (NVDA.O) surging over 11%, Meta Platforms (META.O) jumping almost 8%, and Alphabet (GOOGL.O) up more than 6%.
The Labor Department’s data amounted to a strong sign that price pressures may be starting to subside, with the annual CPI number below 8% for the first time in eight months.
“This is a big deal,” said King Lip, chief strategist at Baker Avenue Asset Management in San Francisco. “We have been calling the peak of inflation for the last couple of months and just have been incredibly frustrating that it hasn’t shown up in the data. For the first time, it has actually shown up in the data.”
Growing recession worries have hammered Wall Street this year. The S&P 500 (.SPX) remains down about 18% year to date, and it is on course for its biggest annual decline since 2008.
The inflation data prompted traders to adjust their rate hike bets, with odds of a 50-basis point rate hike in December jumping to about 85% from 52% before the data was released, according to the CME FedWatch tool.
The CBOE volatility index (.VIX), also known as Wall Street’s fear gauge, fell to a near two-month low of 23.19 points.
In afternoon trading, the S&P 500 was up 4.59% at 3,920.58 points.
The Nasdaq gained 6.17% to 10,992.04 points, while the Dow Jones Industrial Average was up 3.04% at 33,503.45 points.
The Philadelphia semiconductor index (.SOX) surged x%, cutting its loss in 2022 to about 33%.
Some investors also urged caution that Thursday’s rally may be overly optimistic.
“The market is – as it has been a few times this year – very eager to trade a ‘Fed pivot’ … but we think the market is getting a little ahead of itself based on one print,” said Zach Hill, head of portfolio management at Horizon Investments in Charlotte.
The PHLX Housing index (.HGX) jumped 9.6% to its highest since August after tumbling this year over concerns about higher mortgage rates denting affordability.
Rivian Automotive Inc (RIVN.O) jumped 18% after the electric-vehicle maker reported a smaller-than-expected loss, higher number of pre-orders and reaffirmed its full-year production outlook.
Advancing issues outnumbered falling ones within the S&P 500 (.AD.SPX) by a 13.3-to-one ratio.
The S&P 500 posted 17 new highs and no new lows; the Nasdaq recorded 102 new highs and 143 new lows.
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