Last updated at 4:05 PM EST
Stock indices rallied strongly today as they ended today’s trading session in the green. The Dow Jones Industrial Average, S&P 500 and Nasdaq 100 gained 3.7%, 5.54% and 7.49% respectively.
The energy sector lagged the session, gaining 2.2%. Conversely, the technology sector was by far the leader of the session, with a gain of 8.22%.
Additionally, the 10-year US Treasury yield cratered to 3.82%, a drop of more than 27 basis points. Similarly, the two-year Treasury yield also declined, hovering around 4.33%. This brings the gap between them to -51 basis points.
Compared to yesterday, the market is pricing in a higher likelihood of a year-end fed funds rate cut due to today’s inflation report. In fact, market expectations for a rate in the range of 4.25% to 4.5% have risen to 80.6%, up from yesterday’s expectation of 56.7%.
Additionally, the market now also assigns a probability of 19.4% to a range of 4.5% to 4.75%. For reference, investors gave themselves a 43.2% chance yesterday.
The rally is accelerating; Fed officials will continue to hike rates
Last Updated 3:00 PM EST
Today’s stock market rally continues to gather pace as we approach the final hour of trading. As of 3:00 p.m. EST, the Dow Jones Industrial Average, S&P 500 and 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 pretty clear – while the report is encouraging, there is still a lot of work to be done.
Indeed, the year-on-year CPI of 7.7% is far from the inflation target of 2% set by the central bank. As a result, investors shouldn’t get too excited about the data, as this isn’t the first time inflation has shown signs of peaking and then reaccelerating in the following months.
Although some Fed officials have suggested that rate hikes may slow, they have also been very clear that slower hikes are not synonymous with accommodative monetary policy. They still expect to keep raising rates and keep them higher for a longer period of time.
Indeed, San Fransisco Fed President Mary Daly doesn’t believe the rate cuts will happen as soon as the market expects. For reference, current futures prices predict a rate cut in September 2023.
The stock market rally continues; Jobless claims fall short of expectations
Last Updated 12:00 PM EST
Stock indices remain strongly in the green midway through today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are up 3%, 4.7% and 6%, respectively.
On Thursday, the Labor Department released its initial jobless claims report, which was worse than expected. Last week, 225,000 people filed for unemployment insurance for the first time. Expectations were 220,000 people.
When using the four-week average, initial jobless claims were 218,750, down from last week’s reading of 219,000. It should be noted that this figure is within an overall trend to the rise since the end of September.
In addition, continuing unemployment claims, which measure the number of unemployed people eligible for unemployment insurance, stood at 1.493 million. This was above the forecast of 1.475 million and more than last week’s print of 1.487 million.
Continuing jobless claims are currently near their lowest levels since 1970. Relatively speaking, this suggests that individuals have no trouble finding other jobs after being laid off.
However, it will be interesting to see what happens going forward as the Federal Reserve’s tightening policy slowly begins to take effect.
Stocks See Explosive Rally; Treasury yields plunge
Last updated at 10:00 a.m. EST
Stock indices explode higher after 30 minutes of trading. As of 10:00 a.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are down 2.8%, 4.2% and 5.6%, respectively. This can be attributed to a softer than expected CPI report which suggests that inflation may ease.
The energy sector (XLE) is lagging so far, up 1.5%. Conversely, the technology sector (XLK) is the leader of the session with a gain of 5.9%.
WTI crude oil remains below $90 a barrel as investors weigh the impact of a softening outlook caused by recession fears.
Meanwhile, bond yields plunged to start the day, with the 10-year US Treasury yield now hovering around 3.85%. This represents a decline of more than 24 basis points from the previous close.
Similar moves can be seen with the two-year yield, which is now at 4.31%. However, the spread between 10-year and 3-month US Treasury yields is still negative, currently standing at -31 basis points.
Futures up as midterm results and CPI report keep market buzzing
First published at 6:31 a.m. EST
Equity futures edge higher in the early hours of Thursday as investors look to welcome a big day for the eco-politics scene – the October inflation reading and the mid-election results. mandate.
Futures contracts on the Dow Jones Industrial Average (DJIA) gained 0.18%, while those of the S&P 500 (SPX) climbed 0.29%, as of 6:14 a.m. EST Thursday. Meanwhile, the Nasdaq 100 (NDX) futures were up 0.47%.
The indices closed Wednesday’s regular trading hours in the red. The S&P 500, Dow and Nasdaq 100 plunged 2.08%, 1.95% and 2.37% respectively.
Binance’s withdrawal from its plan to acquire rival cryptocurrency exchange FTX was another blow to investor sentiment on Wednesday, hurting the tech sector and sending Bitcoin (BTC-USD) prices at two-year lows.
Elections keep investors on the edge of their seat
Close competition between the Democrats and the Grand Old Party (Republicans) created a tense atmosphere, driving many investors away from the market. There was no Republican sweep as investors had likely hoped, with Democrats offering stiff competition and winning a Senate seat.
Policies set by Republicans are known to be more business-friendly, and therefore market participants are likely hoping for a Republican-controlled Congress — at least one chamber, if not both.
As of this writing, the Republican Party is leading in the House of Representatives race, but Senate seats are still up in the air. The election results seem to be heading towards creating a deadlock situation between Congress and the Senate, which could bode well for the stock market. Indeed, any policy likely to harm economic interests will take longer to adopt.
The current economic crisis is one of the main reasons for the stiff competition as people assess the political approaches of both sides to deal with the economic disruptions.
The October CPI will be released today
The October Consumer Price Index report is due out on Thursday morning. Economists interviewed by Dow Jones are looking at a 0.6% month-over-month price increase, which translates to a 7.9% year-over-year increase. If the reading meets expectations, the market is likely to rebound briefly.
However, if inflation has risen more than expected, the market will likely experience a decline, creating a great opportunity for investors to accumulate fundamentally strong, well-capitalized stocks like Alphabet (NASDAQ: GOOGL)(NASDAQ:GOOG), Apple (NASDAQ: AAPL), etc.
CPI data is a key indicator for the Federal Reserve to choose the direction of its next policy decision. The next FOMC meeting will take place in December.
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