Stocks roar again after sinking on hot inflation data

US stocks rose on Thursday on the back of big drops in the first session, as Wall Street brushed off inflation data that showed consumer prices rose more than expected.

The S&P 500 (^GSPC) rose nearly 3%, marking its biggest intraday rally since February. The Dow Jones Industrial Average (^DJI) rose more than 800 points, or 2.8%. The tech-heavy Nasdaq Composite (^IXIC) rose 2.2%. The 10-year Treasury yield approached 4%.

In energy markets, Brent crude, the international benchmark for oil prices, rose 2.37% to $94.64 a barrel.

The Bureau of Labor Statistics released its September Consumer Price Index (CPI) early Thursday, which showed prices rising 8.2% from a year ago and 0.4% from the previous month. The core consumer price index, which excludes food and energy, rose 6.6% from a year earlier, marking the highest level since 1982. The core CPI rose 0.6% month over month.

Economists surveyed by Bloomberg had expected a slight slowdown to 8.1% annually and the core reading to accelerate to 6.5% from a year earlier.

The reading marks another higher-than-expected CPI print. Housing, food and health care rates were the largest for “many taxpayers,” the report noted. The decline in headline inflation, from 8.3% year-on-year in August, came as gasoline prices fell.

Analysts said the report essentially locked in at least another 75 basis point rate hike from the Federal Reserve when it meets in November.

“The stronger-than-expected 0.4% rise in consumer prices in September, driven once again by a stronger rise in core prices, points to a 75bps rate hike at the November meeting and, in contrast to the Fed minutes released yesterday, it suggests that the Fed may need to continue raising rates at that rate in December and perhaps beyond as well,” wrote Michael Pearce, senior economist at Capital Economics.

Thursday’s session continued a cloudy week for investors marked by corporate earnings on top of inflation data. On Wednesday, the Producer Price Index (PPI), a measure of wholesale prices, rose 0.4% in September after falling 0.2% in the previous month.

Also on Wednesday, investors reflected on the minutes of the Federal Reserve’s latest monetary policy meeting, in which several Fed officials suggested the risk of doing too little to rein in price increases outweighed the risk of doing too much. .

Wall Street was on the lookout for any indication of when and by how much central bankers will cut their rate hikes. But officials’ forecasts in September indicated that tight monetary policy would remain in place until inflation slows significantly.

“Thus, while the FOMC may have a dovish faction, for now they are a long way from the majority and are only tentatively making a case to slow the pace of the hikes,” analysts at Bespoke Investments wrote in a note to investors. customers.

A trader works on the floor of the New York Stock Exchange, NYSE, in New York, the United States, on Oct. 7, 2022. (Photo by Michael Nagle/Xinhua via Getty Images)

On the corporate front, Delta Air Lines (DAL) started gains before the opening. Delta posted a quarterly profit loss according to Wall Street estimates on Thursday, while the airline forecast travel demand to remain strong despite growing risks of an economic downturn.

Shares of Netflix (NFLX) surged more than 5% following news that the streaming company would launch an ad-supported streaming plan for around $7 per month starting November 3 in the US as a way to to increase subscribers.

Elsewhere on Wall Street, JPMorgan Chase Chief Executive Jamie Dimon said Thursday that he had “complete faith and confidence” in Fed Chairman Jerome Powell.

“They’re doing the right thing now. A mild recession is much better than stagflation,” he said of the Fed’s drive to rein in inflation.

At the Institute of International Finance’s annual event in Washington, DC, Dimon also said he doesn’t think there will be a “soft landing” and that his “gut feeling” tells him the Federal Reserve funds rate will eventually have to rise more than 4%-4.5%.

Financial heavyweights like Dimon-led JPMorgan Chase (JPM) and Morgan Stanley (MS) are set to report earnings on Friday, while BlackRock (BLK) reported earnings on Thursday that included a 16% drop in earnings.

“I still think household balance sheets are in good shape,” Jordan Jackson, global market strategist at JPMorgan Asset Management, told Yahoo Finance Live on Wednesday. “I recognize that we anticipate another quarter of a build up in loan loss provisions at banks. This would be the sixth consecutive quarter that banks have decided to build up those loan loss provisions. And that will certainly act as a drag on total earnings for the bank”.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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