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U.S. stock indexes saw outsized gains at Thursday's open as Wall Street cheered lighter-than-expected inflation data and monitored midterm election tallies.
The Consumer Price Index (CPI) for October reflected a 7.7% increase over last year and 0.4% increase over the prior month, better than Wall Street expected. Economists surveyed by Bloomberg called for a 7.9% annual rise and 0.5% monthly gain.
The S&P 500 (^GSPC) rallied 3.4%, while the Dow Jones Industrial Average (^DJI) jumped nearly 800 points, or 2.4%. The technology-heavy Nasdaq Composite (^IXIC) advanced a whopping 4.7%. Meanwhile, Treasury yields tumbled following the report, with the benchmark 10-year note falling below the 4% level.
"The first downside surprise in inflation in several months will inevitably be received by an equity market ovation," Principal Asset Management Chief Global Strategist Seema Shah said in a note, adding however that Federal Reserve officials remain on pace to proceed with rate increases and a pause is still elusive.
"Let the market enjoy today, it still has another 100 basis points or so of tightening to commiserate," she said.
Thursday's moves come after each of the major averages slid at least 2% in the previous session over midterm election uncertainty.
Republicans appeared poised to take control of the House but did not sweep polls at the extent anticipated, undermining optimism over the market-friendly gridlock investors anticipated.
Even as Wall Street awaits political clarity, with vote counting still underway, GLOBALT Investments vice president and senior portfolio manager Thomas Martin argued that markets are laser focused now on only one thing: the effect of central bank tightening on inflation.
“So far, the effects seem to be not all that appreciably different from zero,” he said in a note late Wednesday. “Yes, there have been data points hinting at the easing of some prices, but they haven’t been able to muster sustainable momentum.”
Until the latest policy-setting meeting earlier this month, traders hoped Federal Reserve officials would ease their monetary tightening plans as economic data softens. But Chair Jerome Powell pushed back against the notion that a shift in the Fed’s path is imminent, with inflation and payrolls still firmly elevated.
“The recent inflation data have again come in higher than expected,” Powell said. “Price pressures remain evident across a broad range of goods and services.”
Renewed risk-off sentiment on Wednesday was also stoked by the fast collapse of FTX, the cryptocurrency exchange run by billionaire Sam Bankman-Fried. Concerns over the possibility of insolvency for FTX after rival Binance walked back on an emergency rescue deal to buy the firm wreaked havoc on crypto markets, with jitters pouring over into other risk assets. Bitcoin (BTC-USD) hovered around $16,300 Thursday morning.
On the corporate front, ZipRecruiter (ZIP) shares jumped 17% after the online employment marketplace raised its full-year outlook and greenlighted a $200 million increase to its share repurchase program.
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Shares of Bumble (BMBL) erased a decline of 15% in extended trading after unveiling third-quarter revenue that missed Wall Street estimates and downwardly revised guidance for the current period over currency headwinds and Russia’s war in Ukraine.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
