Dow Has Best Day Since 2020 On Inflation Optimism—But One Analyst Warns It’s ‘Yet Another Triumph Of Hope Over Reality’

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Top Line

Stocks skyrocketed on Thursday after the latest inflation reading showed the Federal Reserve’s fight to slash prices is finally bearing fruit, though experts say it may be part of the Fed’s long odyssey to beat inflation. Only the first step.

Key Facts

The Dow Jones Industrial Average jumped 3.7%, or 1,200 points, while the S&P 500 climbed 5.5% and the tech-heavy Nasdaq 7.4%.

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This is the biggest daily gain for the Dow since May 2020, for the S&P since April 2020, and for the Nasdaq since March 2020.

The jump comes after the Labor Department released last month’s Consumer Price Index data, which showed prices rose 7.7% year-on-year, well below economist estimates and the smallest 12-month increase since January.

It’s clear evidence that the Fed’s continued interest rate hikes have effectively slowed America’s worst bout of inflation in four decades.

The strong CPI report proved to be a strong “first mile” in the Fed’s “marathon” against inflation, with Rick Ridder, BlackRock’s chief investment officer for global fixed income, writing in a Thursday note. Fed, and seeing inflation close to the target would be a true marathon.”

The bond market also edged higher, with the 10-year US Treasury yield falling 33 basis points, its lowest level in a month.

Adverse

John Lynch, chief investment officer at Comerica Wealth Management, threw cold water into Thursday’s stock rally by declaring it “another victory of hope over reality.” Lynch cited a “prolonged battle against inflation” with still-high housing and energy costs and sticky wages.

main background

Mass market movement typically follows the CPI release, with the Dow facing its worst daily performance of 2022 (down 3%) after its September reading, and 3% following the previous month’s reading. Is obtained. The Fed has raised the federal funds rate by 75 basis points in its last four meetings, but investors expect the Fed to adopt less aggressive monetary policy as soon as next month. 81% chance that the next rate hike will be only 50 basis points, according For CME Group’s closely watched FedWatch tool.

tangent line

The cryptocurrency also rallied on Thursday, with bitcoin gaining nearly 10%, surpassing some of the major losses this week after the collapse of cryptocurrency exchange FTX. Bitcoin is still down about 15% since Sunday.

Inflation rises 7.7% in October: slowest pace since January but higher food, rent prices remain ‘problematic’Forbes,

Credit: www.forbes.com /

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