4:20pm: Treasury yields fall
The Dow closed Tuesday up 490 points, 1.4%, at 34,828, the Nasdaq Composite added 327 points, 2.4%, to 14,094 and the S&P 500 improved 84 points, 1.9%, to 4,496. The small-cap Russell 2000 index gained 93 points, 5.4%, to 1,798.
The market surged on hopes that the Fed might adopt a more dovish stance on interest rates after the consumer price index was unchanged in October on a seasonally adjusted basis, according to the US Bureau of Labor Statistics. Annual growth slowed to 3.2%, down 3.7% in September.
“There’s optimism that inflation is cooling to a level where the Federal Reserve can take its foot off the brake,” said Keith Buchanan, portfolio manager at Globalt Investments.
Meanwhile, the 10-year Treasury yield fell below 4.5%, which also lifted investor sentiment.
12:00pm: Stocks extend gains on soft landing hopes
Stocks extended gains at midday encouraged by fall in inflation figures which has boosted hopes that interest rates have peaked ensuring a soft economic landing.
At midday, the Dow Jones Industrial Average was up 531.50 points, 1.6%, at 34,869.37, the S&P 500 was up 84.96 points, 1.9%, at 4,496.51 and the Nasdaq Composite was up 296.19 points, 2.2% at 14,063.93.
Bank of America said the report assuaged concerns of a reacceleration in inflation following the September report and had led them to change "our Fed call."
"We now think the hiking cycle is over," the bank said said.
The bank said the downside surprise on headline was partially due to a 2.5% m/m decline in energy prices.
A combination of softer demand and increased supply contributed to a 4.9% decline in energy goods, which is primarily made up of gasoline, it added.
Ian Shepherdson at Pantheon Macroeconomics said: "Overall, this is a good report, significantly better than we expected."
"It reinforces our view that the Fed is done; it would now take an horrific CPI report for November, and likely a big rebound in payrolls too, in order to trigger a final hike," he added.
9:37am: Stocks jump as weak CPI backs hopes of rate peak
US stocks motored and the dollar slumped after US inflation fell by more than expected in October.
Shortly after the opening bell, the Dow Jones Industrial Average was up 307.21 points, 0.9%, at 34,645.08, the S&P 500 was 64.24 points, 1.5%, at up 4,475.79 and the Nasdaq Composite was up 257.16 points. 1.9%, at 14,024.90.
Andrew Hunter at Capital Economics said: “The softer 0.2% m/m rise in core consumer prices in October kills off any remaining chance of a December rate hike from the Fed, and we continue to expect a further decline in inflation over the coming months, which will bring interest rate cuts onto the agenda before long.”
Daniele Antonucci, chief investment officer at Quintet agreed: “Today’s inflation numbers support the notion that the Fed is done with its rate hiking cycle.”
“We expect the Fed to hold interest rates in the 5.25-5.50% range, before cutting them slowly over the course of 2024.”
The dollar lost ground against the pound, euro and the yen with sterling trading 1.2% higher at $1.2426.
Bond yields also fell, with the yield on rate-sensitive two-year Treasuries down 0.13 percentage points to 4.9%, while yields on benchmark 10-year Treasuries fell 0.14 percentage points to 4.48%.
8:47am: Futures jump, dollar slides as inflation eases more than expected
US inflation fell sharply in October, and by more than expected, boosting hopes that US interest rates have peaked.
The news sent stock futures soaring on Wall Street with the Dow Jones, S&P and Nasdaq all expected to open sharply higher, while the dollar plummeted.
US CPI (M/M) Oct: 0.0% (est 0.1%; prev 0.4%)
- CPI Core (M/M) Oct: 0.2% (est 0.3%; prev 0.3%)
- CPI (Y/Y) Oct: 3.2% (est 3.3%; prev 3.7%)
- CPI Core (Y/Y) Oct: 4.0% (est 4.1%; prev 4.1%)
— LiveSquawk (@LiveSquawk) November 14, 2023
The consumer price index was unchanged in October on a seasonally adjusted basis, after increasing 0.4% in September, the US Bureau of Labor Statistics reported, taking annual growth to 3.2%, down 3.7% in September.
Both figures were below forecasts of 0.1% and 3.3% respectively.
Core CPI, which strips out food and energy, rose 0.2% in October from September, less than the 0.3% forecast, taking annual growth to 4.0%, down from 4.1% in September. It was expected to remain unchanged.
Richard Garland, Chief Investment Strategist, Omnis Investments said: “This should reaffirm the Fed's view that interest rates are restrictive enough to bring inflation back to target, albeit they will keep rate hikes on the table until a low 2% inflation handle heaves into view.”
The index for shelter continued to rise in October, offsetting a decline in the gasoline index and resulting in the seasonally adjusted index being unchanged over the month.
The energy index fell 2.5% over the month as a 5.0% decline in the gasoline index more than offset increases in other energy component indexes.
Food prices increased 0.3% in October, after rising 0.2% in September.
7:00am: Futures steady with all eyes on inflation
US stocks futures are pointing to a positive start on Wall Street, although much will depend on consumer price index data released before the opening bell.
In pre-market trading, futures for the Dow Jones Industrial Average were flat, while those for the S&P 500 were 0.1% higher, and contracts for the Nasdaq 100 futures were up 0.2%.
Pricing pressures in the US are expected to have eased in October, with the year-on-year rise in the headline consumer price index forecast to have cooled to 3.3% in October from 3.7% in September.
Core inflation is seen unchanged at 4.1%.
Ipek Ozkardeskaya, at Swissquote Bank said: “Investors are on the edge of their seats, waiting for the latest scoop on US inflation data to take a fresh direction in both stock and bond markets.”
“The dollar index remains offered, the US political risks are casting shadows, and there's a rising chorus of opinions playing the guessing game on when and how much the Fed might trim the rates next year,” she added.
In company news, Home Depot reported better-than-expected third quarter earnings despite a drop in sales.
The home improvement outfit also narrowed guidance for revenue and earnings for the full-year.