U.S. Stocks Rebounding Amid Positive Reaction To Inflation Data

Following the pullback seen over the two previous sessions, stocks have moved back to the upside during trading on Wednesday. The tech-heavy Nasdaq has led the rebound, surging to a new record intraday high.

Currently, the Nasdaq and the S&P 500 are hovering near their best levels of the day. The Nasdaq is up 257.40 points or 1.3 percent at 19,944.64 and the S&P 500 is up 43.36 points or 0.7 percent at 6,078.27.

The narrower Dow is posting a more modest gain, up 12.75 points or less than a tenth of a percent at 44,260.58, with a slump by shares of UnitedHealth (UNH) limiting the upside for the blue chip index.

The strength on Wall Street comes following the release of closely watched consumer price inflation data that came in line with economist estimates.

The Labor Department said its consumer price index climbed by 0.3 percent in November after rising by 0.2 percent for four straight months. The increase matched expectations.

The annual rate of growth by consumer prices ticked up to 2.7 percent in November from 2.6 percent in October, which was also in line with estimates.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in November, matching the increases seen in each of the three previous months as well as expectations.

The Labor Department also said core consumer prices in November jumped by 3.3 percent compared to the same month a year ago, unchanged from October and in line with estimates.

With the data matching expectations, the report has increased confidence the Federal Reserve will lower interest rates by another quarter point next week.

CME Group’s FedWatch Tool is currently indicating a 96.4 percent chance the Fed will cut rates by 25 basis points at its December meeting.

“The increase in the inflation rate (2.7% vs 2.6%) won’t be enough to spoil Christmas – the Fed is going to cut rates another 25 bps next week and that should enable markets to rally into year end,” said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.

He added, “The headline CPI was consistently above 3% in the beginning of the year and now it is consistently below 3%, so despite the fact that the series is a little noisy from month-to-month, we believe the Fed is likely to look through these fluctuations and continue on their easing path.”

Sector News

Gold stocks have shown a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 2.9 percent to its best intraday level in a month.

The rally by gold stocks comes amid a sharp increase by the price of the precious metal, with gold for February delivery surging $36.50 to $2,754.90 an ounce.

Considerable strength is also visible among retail stocks, as reflected by the 1.7 percent gain being posted by the Dow Jones U.S. Retail Index. The index has reached a new record intraday high.

Software, airline and semiconductor stocks are also seeing significant strength, while computer hardware stocks are extending yesterday’s sell-off.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Wednesday. Japan’s Nikkei 225 Index closed just above the unchanged line and China’s Shanghai Composite Index rose by 0.3 percent, while Hong Kong’s Hang Seng Index slid by 0.8 percent.

Meanwhile, the major European markets have all moved to the upside on the day. While the French CAC 40 Index is up by 0.3 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both up by 0.2 percent.

In the bond market, treasuries have shown a lack of direction over the course of the session. Currently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.7 basis points at 4.238 percent.