US stocks posted their biggest one day rise in two years on Thursday, after the inflation report came in lighter than expected, and the election results began to emerge more clearly, giving the markets some certainty.
The October Consumer Price Index report came in showing a 7.7% year over year increase in prices, and a 0.4% increase over the prior month, which was better than experts predicted. A Bloomberg analysis had found economists expecting a 7.9% year over year rise, and a monthly rise of 0.5%.
The S&P 500 gained 5.5%, which was the biggest intra-day rise since April of 2020. The Dow Jones Industrial Average rose 1200 points for a 3.7% gain, the biggest since May of 2020. The Nasdaq Composite skyrocketed 7.4%, the sharpest rise it has seen since it exited the pandemic crash of March 2020. Treasuries fell off the inflation report, as the 10-year benchmark fell well below 4%.
The report fueled hopes that the Federal Reserve may at some point now begin easing the tightening of its monetary policy, as investors began placing less emphasis on Fed Chair Jerome Powell’s statement earlier in the month, that there was no policy shift immediately forthcoming.
Adding to this perception were comments by Federal Reserve Bank of Philadelphia President Patrick Harker, which indicated Thursday that officials may be getting closer to a pause in their tightening policy. Other officials have indicated tightening would continue, albeit at a slower pace.
Technology stocks led the gains, with Apple (AAPL) and Microsoft Corporation (MSFT) both up over than 8%. Meanwhile, Amazon (AMZN) shares were up 12%, as Facebook parent Meta (META) surged 10%. Nividia (NVDA) jumped up 14%.
The rises added approximately $400 billion in capitalization to the markets on Thursday, judging by data from Bloomberg.
Principal Asset Management Chief Global Strategist Seema Shah said in a note, “The first downside surprise in inflation in several months will inevitably be received by an equity market ovation.” She noted however that it appears for the time being the Federal Reserve is not changing its course, and a pause in rate hikes may prove more elusive. “Let the market enjoy today, it still has another 100 basis points or so of tightening to commiserate,” she added.
Elsewhere, unemployment filings were up last week according to Labor Department data, however they remained at historic lows. Initial jobless claims were 225,000, which was up 7,000 over the previous week.
GLOBALT Investments vice president and senior portfolio manager Thomas Martin however made the case that presently investors are entirely focused on the Federal Reserve’s future policy positions. In a note Wednesday, he said, “So far, the effects seem to be not all that appreciably different from zero. Yes, there have been data points hinting at the easing of some prices, but they haven’t been able to muster sustainable momentum.”
