U.S. Stocks Soar As Consumer Price Growth Slows More Than Expected

Stocks have skyrocketed in morning trading on Thursday, more than offsetting the sharp pullback seen in the previous session. With the substantial rebound, the Dow has once again reached its best intraday level in well over two months.

Currently, the major averages are hovering near their best levels of the day. The Dow is up 873.76 points or 2.7 percent at 33,387.70, the Nasdaq is up 575.14 points or 5.6 percent at 10,928.31 and the S&P 500 is up 156.59 points or 4.2 percent at 3,905.16.

The rally on Wall Street comes following the release of a report from the Labor Department showing a smaller than expected monthly increase in consumer prices as well as a bigger than expected slowdown in the annual rate of price growth.

The Labor Department said its consumer price index rose by 0.4 percent in October, matching the increase seen in September. Economists had expected consumer prices to climb by 0.6 percent.

The annual rate of growth in consumer prices also slowed to 7.7 percent in October from 8.2 percent in September. The year-over-year increase was the smallest since January and came in below estimates for an 8.0 percent jump.

The report also showed core consumer prices, which exclude food and energy prices, edged up by 0.3 percent in October after advancing by 0.6 percent in September. Economists had expected core prices to rise by 0.5 percent.

The annual rate of growth in core prices also slowed to 6.3 percent in October from 6.6 percent in September, coming in below estimates for 6.5 percent growth.

The data suggests the Federal Reserve’s efforts to contain inflation are having an effect, reinforcing recent optimism the central bank will slow the pace of interest rate hikes as early as next month.

“Evidence is accumulating that inflation has peaked and is now falling again,” said Dr. Christoph Balz and Bernd Weidensteiner, senior economists at Commerzbank. “The Fed’s next rate hike is therefore likely to be smaller.”

Following the inflation data, CME Group’s FedWatch Tool is currently indicating an 80.6 percent chance of a 50 basis point rate hike next month and a 19.4 percent chance of another 75 basis point rate hike.

A separate report released by the Labor Department showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended November 5th.

Interest rate-sensitive housing stocks have soared on optimism about slower rate hikes, driving the Philadelphia Housing Sector Index up by 10.5 percent to a two-month intraday high.

Substantial strength has also emerged among retail stocks, as reflected by the 6.8 percent spike by the Dow Jones U.S. Retail Index. The index is bouncing off its lowest closing level in almost five months.

Semiconductor stocks are also seeing significant strength on the day, with the Philadelphia Semiconductor Index surging by 6.6 percent.

Gold, commercial real estate and computer hardware stocks are also posting standout gains amid a broad based rally on Wall Street.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index slumped by 1.0 percent, while China’s Shanghai Composite Index fell by 0.4 percent.

Meanwhile, the major European markets have shown strong moves to the upside on the day. While the German DAX Index has spiked by 3.4 percent, the French CAC 40 Index is up by 2.1 percent and the U.K.’s FTSE Index is up by 1.2 percent.

In the bond market, treasuries have skyrocketed following the release of the U.S. inflation data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 29.4 basis points at 3.857 percent.

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