4.05pm: Dow, S&P and Nasdaq advance
US markets ended the day in positive territory as weaker than expected inflation figures suggested pricing pressures may be on the wane.
At the close the Dow Jones Industrial Average was up 104 points, or 0.3%, to 34,109, the S&P 500 rose 29 points, or 0.74%, to 4,020 and the Nasdaq Composite advanced 113 points, or 1.01%, to 11,257.
The weak data boosted hopes that the Federal Reserve will signal a lower peak in interest rates, and a slower pace of increases, than previously forecast when it makes its latest rate call tomorrow.
“We expect this will open the door for Fed Chair Powell to discuss a further step down in the pace of rate hikes at his post-FOMC meeting press conference tomorrow” said Mickey Levy at Berenberg.
“Chair Powell is likely to lay the groundwork for a 25bp rate hike at the FOMC’s February meeting,” he suggested.
The Federal Reserve is still expected to raise interest rates by 50bps tomorrow but the market is now pricing in a lower peak for rates in 2023 than before.
Simon Harvey, head of FX analysis at Monex Europe pointed out that after the data: “The probability of a 50bp hike at February’s meeting almost halved to 28%, while terminal rate pricing for June’s meeting fell 20bps from 5% to 4.8%.”
Ian Shepherdson, chief economist at Pantheon Macroeconomics said: “We now think 25bp is more likely on Feb 1, and we think that will be the final hike.”
Stocks on the move included Moderna which soared 19.74% as the drugmaker issued promising data about its cancer treatment. It said its experimental melanoma vaccine combined with Merck cancer treatment Keytruda cut the risk of skin cancer recurrence or death by 44%, compared with a treatment of only Keytruda.
Tech giants Amazon.com and Meta Platforms were also on the rise after Goldman Sachs (NYSE:GS) named the stocks their top picks of 2023.
12.05 pm: Dow sees second-straight day of gains
US stocks advanced sharply in noon trading as consumer prices for November came in weaker than expected, sparking investor hopes than inflation is peaking.
At midday, the Dow gained 121 points to 34,126, while the S&P 500 added 37 points at 4,028 and the tech-heavy Nasdaq climbed 142 points to 11,286.
The consumer price index (CPI) increased 0.1% from the previous month, and rose 7.1% from a year ago, surpassing economist expectations of a 0.3% monthly gain and a 7.3% yearly increase.
“Today is a day where the entire bullish scenario is working,” Interactive Brokers chief strategist Steve Sosnick said.
“Stocks love the story of a less restrictive Fed and the dollar is weaker which also helps stocks,” Sosnick added.
Tech stocks sparked gains in the major indices, led by a more than 6% advance from shares of Meta Platforms Inc (NASDAQ:FB) as well as a more than 5% upward move by Alphabet Inc (NASDAQ:GOOG) stock.
9.35am: Sign inflation is near its peak sparks market rally
US stocks jumped at the open on Tuesday on new data that showed inflation cooled in November.
Just after the market opened, the Dow Jones Industrial Average had added 519 points or 1.5% at 34,524 points, the S&P 500 was up 88 points or 2.2% at 4,079 points, and the Nasdaq Composite had gained 359 points or 3.2% at 11,503 points.
Bitcoin also rallied on the news, up 5.2% at US$17,884.
ADSS global head of strategy and trading services Srijan Katyal said the CPI rising by just 0.1% to reach 7.1% showed that we may be nearing the inflation peak, with easing inflation on the not-too-distant horizon.
“Lower oil prices and the significant improvements in supply chain issues may not have yet had an impact, however, once these come into play, they would back US Treasury Secretary Janet Yellen’s comments that inflation will be substantially reduced in 2023,” Katyal said.
Katyal added that this further supported the general consensus that the Fed will maintain its prescription of rate hikes tomorrow, with a 50 basis point raise already firmly priced into the markets.
“A 75-point raise isn’t off the table, but the lower target will be the likely outcome of the FOMC meeting as the Fed calibrates its monetary policies,” Katyal said.
8.40am: CPI data surprises
While price pressures continue to impact the US economy, inflation slowed at a faster rate than expected in November, according to the latest data from the Bureau of Labor Statistics.
The Consumer Price Index (CPI) rose 7.1% year-over-year in November, down from a 7.7% increase in October and below the consensus analyst expectation of 7.3%.
Inflation rose 0.1% over the previous month, compared to the 0.4% recorded in October and the 0.3% expected by analysts.
Futures for the three major indexes soared on the news with the Dow Jones up 2.3%, the S&P 500 adding 2.5%, and the Nasdaq Composite up 3.1% in pre-market trading.
6.30am: All eyes on CPI data ahead of market open
Wall Street is expected to open higher ahead of November’s US consumer price index (CPI) inflation reading, which may sway the Federal Reserve's decision as the Federal Open Market Committee gets down to business for its last policy meeting of 2022.
Futures for the Dow Jones Industrial Average rose 0.4% in Tuesday pre-market trading, while those for the broader S&P 500 index gained 0.4% and Nasdaq-100 futures added 0.5%.
Annualised CPI for November is expected to show a deceleration to 7.3%, from 7.7% in October, after peaking above 9% in June. Headline prices are expected to have risen by 0.3% month-on-month, from 0.4% a month earlier. The data is due for release at 8:30am ET, ahead of the US markets' open.
The Federal Reserve Bank of New York’s Center for Microeconomic Data yesterday released the November 2022 Survey of Consumer Expectations, which showed that inflation expectations decreased in November in the short, medium, and longer terms.
Together with M&A activity, that supported US stocks on Monday, pushing the Dow Jones 1.6% higher by the close to 34,004.81. The S&P 500 rose 1.4% to 3,991 and the Nasdaq Composite advanced 1.3% to 11,144.
“Markets will have to wait until tomorrow for the (Fed's) verdict ... but with yesterday’s consumer inflation expectations painting a more tempered outlook, hopes are evidently building that the series of 75 basis point hikes is now behind us. Wall Street certainly bought into a more dovish policy outlook on Monday with major indices making strong gains,” commented James Hughes, chief market analyst at Scope Markets.
While the Fed is widely expected to increase interest rates by 50 basis points, Hughes said traders “may now be wanting to sit on the sidelines until the Fed has shown its hand tomorrow.”
“Make no mistake, any grinch-like overtures will leave plenty of room for profit-taking,” he added.