Last Updated 4:05 PM EST
Stock indices saw a strong rally today as they finished today’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 gained 3.7%, 5.54%, and 7.49%, respectively.
The energy sector was the session’s laggard, as it gained 2.2%. Conversely, the technology sector was by far the session’s leader, with a gain of 8.22%.
Furthermore, the U.S. 10-Year Treasury yield cratered to 3.82%, a decrease of more than 27 basis points. Similarly, the Two-Year Treasury yield also decreased, as it hovers around 4.33%. This brings the spread between them to -51 basis points.
Compared to yesterday, the market is pricing in a higher chance of a lower Fed Funds rate for the end of the year as a result of today’s inflation report. In fact, the market’s expectations for a rate in the range of 4.25% to 4.5% increased to 80.6%, which is up from yesterday’s expectations of 56.7%.
In addition, the market is now also assigning a 19.4% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 43.2% chance yesterday.
Rally Accelerates; Fed Officials to Continue Raising Rates
Last Updated 3:00PM EST
Today’s stock market rally continues to accelerate heading into the final hour of the trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 3.3%, 4.8%, and 6.3%, respectively.
Federal Reserve officials made some comments today after the better-than-expected inflation report. Their message was fairly clear – although the report was encouraging, there is still plenty of work to do.
Indeed, year-over-year CPI of 7.7% is nowhere near the 2% inflation target that has been set by the central bank. As a result, investors shouldn’t get too excited by the data as this isn’t the first time inflation has shown signs of peaking only to reaccelerate in the following months.
Although some Fed officials suggested that rate hikes may slow down, they were also very clear in specifying that slower hikes did not equate to easy monetary policy. They still expect to continue raising rates and keep them higher for a longer period of time.
Indeed, San Fransisco Fed President Mary Daly doesn’t believe that rate cuts will happen as early as the market expects. For reference, current futures pricing expects a rate cut to occur during September of 2023.
Stock Rally Continues; Jobless Claims Miss Expectations
Last Updated 12:00PM EST
Stock indices remain strongly in the green halfway into today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 3%, 4.7%, and 6%, respectively.
On Thursday, the Department of Labor released its Initial Jobless Claims report, which came in worse than expected. In the past week, 225,000 people filed for unemployment insurance for the first time. Expectations were for 220,000 individuals.
When using the four-week average, initial jobless claims were 218,750, down from last week’s reading of 219,000. It’s worth noting that this figure has been in an overall uptrend since the end of September.
In addition, Continuing Jobless Claims, which measures the number of unemployed people who qualify for unemployment insurance, came in at 1.493 million. This was above the forecast of 1.475 million and higher than last week’s print of 1.487 million.
Continuing Jobless Claims are currently sitting near their lowest levels since 1970. Relatively speaking, this suggests that individuals aren’t struggling to find other jobs after being laid off.
However, it’ll be interesting to see what will happen going forward as the Federal Reserve’s tightening policy slowly begins taking effect.
Stocks See an Explosive Rally; Treasury Yields Plunge
Last Updated 10:00AM EST
Stock indices are exploding to the upside after 30 minutes of trading. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 2.8%, 4.2%, and 5.6%, respectively. This can be attributed to a lighter-than-expected CPI report which suggests that inflation may be easing.
The energy sector (XLE) is the laggard so far, as it is up 1.5%. Conversely, the technology sector (XLK) is the session’s leader with a gain of 5.9%.
WTI crude oil remains below $90 per barrel as investors weigh the impact of a softening outlook that’s being caused by recession fears.
Meanwhile, bond yields plunged to start the day, as the U.S. 10-Year Treasury yield is now hovering around 3.85%. This represents a decrease of more than 24 basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 4.31%. However, the spread between the 10-Year and Three-Month U.S. Treasury yields is still negative, as it currently sits at -31 basis points.
Futures Up as Midterms and CPI Report Keep Market Abuzz
First Published 6:31AM EST
Stock futures are inching higher in the early hours of Thursday as investors are looking to welcome a big day for the eco-political scene —the October inflation reading and the midterm election results.
Futures on the Dow Jones Industrial Average (DJIA) gained 0.18%, while those on the S&P 500 (SPX) climbed 0.29%, as of 6.14 a.m. EST, Thursday. Meanwhile, the Nasdaq 100 (NDX) futures advanced 0.47%.
The indexes closed the regular trading hours of Wednesday in the red. The S&P 500, the Dow, and the Nasdaq 100 dipped 2.08%, 1.95%, and 2.37%, respectively.
Binance pulling out of its plan to acquire rival cryptocurrency exchange platform FTX was another blow to investor sentiment on Wednesday, hurting the technology sector and sending Bitcoin (BTC-USD) prices to two-year lows.
Elections Keep Investors at The Edge of Their Seats
The close competition between the Democrats and the Grand Old Party (Republicans) created a tense atmosphere, making many investors flee from the market. There was no Republican sweep as investors likely had hoped, with the Democrats giving tough competition and winning one seat in the Senate.
Policies set by Republicans are known to be more pro-business, and hence, market participants are likely to be hoping for a Republican-controlled Congress — at least one chamber, if not both.
As of writing, the Republican party is ahead in the run for the House of Representatives, but the Senate seats are still up in the air. The election results appears to be heading toward the creation of a gridlock situation between Congress and the Senate, which could bode well for the equity market. This is because any policy that is likely to hurt economic interests will take more time to be passed.
The current economic crisis is one of the major reasons behind the tough contest, as people are weighing the policy approaches of both parties to address economic disruptions.
October CPI to Be Revealed Today
The consumer price index report for October is due to be released on Thursday morning. Economists surveyed by Dow Jones are looking at an increase of 0.6% month-over-month in prices, which translates to 7.9% year-over-year. If the reading meets expectations, the market is likely to rally briefly.
However, if inflation has increased more than expected, the market will likely see a drop, creating a great opportunity for investors to accumulate fundamentally strong and well-capitalized stocks like Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG), Apple (NASDAQ:AAPL), etc.
The CPI data is a key gauge for the Federal Reserve to choose the direction of its next policy move. The next FOMC meeting is in December.
