U.S. Stocks Holding On To Substantial Gains After Early Rally

Stocks moved sharply higher early in the session on Thursday and continue to see substantial strength in afternoon trading. The major averages have moved than offset the notable pullback seen on Wednesday, with the Dow reaching its best intraday level in well over two months.

Currently, the major averages are off their best levels of the day but still posting substantial gains. The Dow is up 854.68 points or 2.6 percent at 33,368.62, the Nasdaq is up 604.32 points or 5.8 percent at 10,957.50 and the S&P 500 is up 158.79 points or 4.2 percent at 3,907.36.

The early rally on Wall Street came 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 85.4 percent chance of a 50 basis point rate hike next month and a 14.6 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.

Sector News

Interest rate-sensitive housing stocks continue to turn in some of the market’s best performances on the day, with the Philadelphia Housing Sector Index soaring by 10.0 percent to its best intraday level in well over two months.

Substantial strength also remains visible among semiconductor stocks, as reflected by the 8.1 percent spike by the Philadelphia Semiconductor Index.

Gold stocks have also moved sharply higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 7.2 percent. The rally by gold stocks comes as the price of gold for December delivery is surging $40.30 to $1,754 an ounce.

Retail, commercial real estate, banking and computer hardware stocks are also seeing significant strength, moving sharply higher along with most of the other major sectors.

Other Markets

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 showed strong moves to the upside on the day. While the German DAX Index spiked by 3.5 percent, the French CAC 40 Index surged by 2.0 percent and the U.K.’s FTSE Index jumped by 1.1 percent.

In the bond market, treasuries remain sharply higher after skyrocketing 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 30.9 basis points at 3.842 percent.