Wall Street rally lifts Nasdaq 20% from low as inflation fears recede

  • The Fed has now seen a 50 basis point rise in September
  • US consumer price growth slows in July
  • Musk sells Tesla shares worth $6.9 billion
  • Volatility index closes at four-month low

NEW YORK (Reuters) – Wall Street surged on Wednesday, topping the Nasdaq index more than 20 percent from its June lows, after U.S. inflation slowed more than expected in July and raised hopes that the Federal Reserve would become less aggressive with rate hikes. Benefit. .

The Labor Department said a sharp drop in the cost of gasoline helped keep the US consumer price index steady last month after rising 1.3% in June. The CPI rose less-than-expected 8.5% over the past 12 months after rising 9.1% in June. Read more

The rally came on the heels of the first significant sign of relief to Americans who watched inflation steadily rise. The Nasdaq is now up 20.8% since it bottomed but still needs to surpass its previous peak in November to confirm a new bull market.

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Fed fund futures traders are now pricing in only a 43.5% chance that the US central bank will raise interest rates by 75 basis points when it meets in September, compared to 68% before the data. A 50 basis point rise is considered a 56.5% probability. Read more

“For the market, it’s kind of a Goldilocks scenario right now because the labor market is holding up and inflation is likely to start coming down. That’s what a soft landing would look like,” said Sean Snyder, Citi’s head of investment strategy. American Wealth Management in New York.

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But Snyder said one month of slowing inflation is not enough for the Fed to send a very clear signal.

The recovery on Wall Street was broad-based, as all eleven S&P 500 sectors rose in a sea of ​​green. growth stocks (.IGX) rose more than the value (.IVX)while transporting the dao (.DJT)Lowercase letters (.rut) and semiconductors (.sox) also rose.

Dow Jones Industrial Average (.DJI) It rose 535.1 points, or 1.63%, to 3,3309.51 points, while the Standard & Poor’s 500 Index rose (.SPX) It rose 87.77 points, or 2.13%, to 4,210.24 points, and the Nasdaq Composite (nineteenth) It added 360.88 points, or 2.89%, to 12,854.81 points.

It was the biggest one-day gain for the Nasdaq and S&P 500 in two weeks, and for the Dow Jones in three weeks. It was the S&P 500’s highest close since early May.

β€œ(Inflation at) 8.5% is still very high, but there is optimism that June may have been the peak,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

Frederick said producer price data for July on Thursday along with August inflation and employment data due next month could change the Fed’s tack again.

The Federal Reserve has raised interest rates by 225 basis points since March despite concerns that a sharp rise in borrowing costs could push the US economy into recession.

Traders work on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, US, August 8, 2022. REUTERS/Andrew Kelly

Chicago Fed President Charles Evans said slowing inflation was the first “positive” reading of price pressures since the Fed began tightening policy, even as he indicated he thought the Fed had a lot of work to do. Read more

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After a rough start to the year, the S&P 500 index is up nearly 15% from its lows in mid-June, largely on expectations that the Fed will be less hawkish than expected in its efforts to provide a soft landing for the economy as it struggles to rein in inflation.

But the S&P 500 is 12% below its all-time high in January, having been in a bear market ever since.

CBOE Volatility Index (.VIX)A measure of fear on Wall Street, it fell below the 20.00 level to close at a four-month low.

Multiple high-growth technology stocks, whose valuations are vulnerable to higher bond yields, rose as Treasury yields fell sharply across the board. Apple company (AAPL.O)Alphabet Corporation (GOOGL.O)Amazon.com Inc (AMZN.O) and Microsoft Corporation (MSFT.O) All of them rose by more than 2%.

Banks sensitive to the economy (.SPXBK) Leading 2.7%, with Goldman Sachs Group (GS.N) and Morgan Stanley (MS.N) Each climbs about 3%.

“Banks have been underperforming and are now bidding,” said Thomas Hayes, managing director at Great Hill Capital LLC, adding that investors were chasing laggards who had not participated in the rally since June lows.

Tesla Corporation (TSLA.O) It rose 3.9% after Elon Musk sold $6.9 billion worth of stock in the electric car maker to fund a potential deal for Twitter Inc. (TWTR.N) If he loses a legal battle with the social media platform. Twitter gained 3.7%. Read more

Meta Platforms Company (META.O) It jumped 5.8 percent after Facebook’s parent company said on Tuesday it had raised $10 billion in its first-ever bond offering. Read more

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Volume on US exchanges was 11.33 billion shares, compared to an average of 10.98 billion shares for the full session over the past 20 trading days.

Advance issues outnumbered declining issues on the New York Stock Exchange by 5.69 to 1; On the Nasdaq, the ratio was 3.34 to 1 in favor of advanced traders.

The S&P 500 posted five new 52-week highs and 29 new lows; The Nasdaq Composite recorded 64 new highs and 54 new lows.

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(Herbert Lash Reporting) Additional reporting by Bansari Mayor Kamdar, Aniruda Ghosh, Sruthi Shankar, Medha Singh and Karina D’Souza in Bengaluru; Editing by Anil de Silva, Shunak Dasgupta and Lisa Schumaker

Our criteria: Thomson Reuters Trust Principles.

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