On Friday, U.S. stocks continued their rapid ascent that began earlier this week following a slowdown in inflation data released by the CPI spurred the most powerful surge on Wall Street since the beginning of 2020.
The technology-focused Nasdaq Composite (IXIC) recorded a 1.9% increase during the same time period, while the S&P 500 (GSPC) had a 0.9% increase, marking its most profitable week since June. The Dow Jones Industrial Average (DJI) finished the day with a little gain, gaining 0.1%, but it lagged behind the performance of the other indices.
On Thursday, all three major averages soared, with each registering their highest one-day gains since bouncing back from the throes of the COVID meltdown more than two years ago. The lower-than-expected consumer price data for October, which encouraged bets that the Federal Reserve may suspend the tightening of financial conditions as soon as early in the new year, was the catalyst for outsized swings in the market.
The S&P 500, Dow, and Nasdaq all experienced significant gains, with the S&P 500 increasing by 5.5%, the Dow by 3.7% (or 1,200 points), and the Nasdaq by 7.4%.
Since the beginning of the Global Financial Crisis more than ten years ago, the rates on U.S. Treasury bonds and the index of the value of the United States dollar both experienced their largest one-day drop on Thursday. On Friday, due to Veteran’s Day, the bond market was not open for business.
In early trade, the mood was bolstered as a result of a reversal in China’s Zero-COVID policy, which aimed to limit the amount of time spent in quarantine by tourists visiting the country. West Texas Intermediate (WTI) futures jumped roughly 3 percent to above $88 per barrel as traders expected that the decision may spark a boost to commodity demand. This led to an increase in the price of oil markets.
The preliminary estimate from the University of Michigan’s consumer sentiment survey for November dropped to 54.7 from 59.9 in October, marking the poll’s lowest level since July. This news came as the University of Michigan released new economic data.
According to a statement made by Sonia Meskin, Head of U.S. Macro for BNY Mellon Investment Management, in a note published on Thursday about the CPI report, “Overall, the report suggests that peak inflation may finally be behind us,” despite the fact that inflation may remain elevated for some time.
She mentioned that the statistic lends credence to the FOMC’s projection of a lesser rate increase of 0.50% for December, which was telegraphed at this month’s meeting and which markets are already pricing in.
She continued by saying, “However, it is equally necessary to not over-emphasize one report for inflation and policy trajectory,” which means that it is crucial to avoid doing so.
In October, the Consumer Price Index (CPI) climbed at an annual rate of 7.7% and showed a monthly increase of 0.4%. Prices increased at a rate of 6.3% year-over-year and 0.3% month-over-month when looking at them on a “core” basis, which excludes the volatile food and energy components of the report.
Despite the moderation, many strategists argue that the excitement is premature because Federal Reserve officials are still poised to tighten further. Chair Jerome Powell stated last month that policymakers still have “some ways to go” on restoring price stability, a message that his central bank colleagues have since also echoed in a series of public speeches. Despite the moderation, many strategists argue that the excitement is premature because Federal Reserve officials are still poised to tighten further.
“The Fed’s severe data dependence paired with the fact that economic statistics will only indicate the real-time labor market and inflation downturn with a lag,” Gregory Daco, chief economist at EY Parthenon, stated in emailed remarks. “This increases the odds of an overtightening accident.”
In the meantime, Nicholas Colas of DataTrek highlights another reality: despite the fact that inflation tends to trend lower once it peaks and starts to decline – as was observed in 1970, 1974, 1980, 1990, 2001, and 2008 – this downshift is typically accompanied by recessions, and there are no exceptions to the rule. Inflation tends to trend lower once it peaks and starts to decline.
As the FTX scandal continued to unfold and the firm announced early Friday morning that it would be filing for bankruptcy, the cryptocurrency world remained in a state of disarray.
The fallen cryptocurrency hero and billionaire Sam Bankman-Fried has also resigned from his position as CEO. It is also being reported that he is the subject of an inquiry by the United States Securities and Exchange Commission (SEC) while his exchange looks for a financial rescue.
On Friday afternoon, the price of bitcoin was around $16,500.
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