Futures linked to the S&P 500 (^GSPC) rose 0.5%, while Dow Jones Industrial Average futures (^DJI) added 165 points, or about the same percentage increase as the S&P. Contracts on the tech-heavy Nasdaq Composite (^IXIC) were 0.7% higher. Treasury yields held steady after Thursday’s steepest one-day drop in more than a decade.
A a dramatic turnaround in China’s Zero-COVID policy to reduce the time under quarantine, travelers to the country also spend lively moods. Oil markets advanced as traders speculated the move could boost crude demand, with West Texas Intermediate (WTI) futures rebounding more than $3 to settle at $90 a barrel.
All three major averages jumped sharply on Thursday, each recording their biggest one-day advance since recovering from the throes of the COVID meltdown two years ago. The oversized moves were catalyzed by lighter consumer price data in October that fueled bets that the Federal Reserve could stop tightening financial conditions as early as next year. The S&P 500, Dow and Nasdaq jumped 5.5%, 3.7% — or 1,200 points — and 7.4%, respectively.
“Overall, the report suggests that peak inflation may finally be behind us, although inflation may remain high for some time,” BNY Mellon Investment Management’s head of US macro Sonia Meskin said on Thursday — also noting that the figure supports a lower 0.50% interest rate hike for December was telegraphed at this month’s FOMC meeting and investors are pricing in the price.
“However, it is important not to overemphasize one report on inflation and the trajectory of policy,” she added.
The Consumer Price Index (CPI) in October rose 7.7% year-on-year and increased 0.4% on the month. On “basic” basiswhich strips out the volatile food and energy components of the report, prices rose 6.3% year-on-year and 0.3% month-on-month.
Despite the moderation, many strategists say the excitement is premature, such as Federal Reserve officials it is still ready to tighten further after Speaker Jerome Powell said last month that policymakers still had “some ways to go” to restore price stability, a message his central bank colleagues have since echoed in a series of public speeches.
“The Fed’s extreme reliance on data, combined with the fact that economic data will only show the labor market in real time and the lag in inflation, increases the chances of an over-tightening accident,” said Gregory Dako, chief economist at EY Parthenon. in email comments.
Meanwhile, DataTrek’s Nicholas Collas points to another reality: Although inflation trends lower after it peaks and starts to decline—as seen in 1970, 1974, 1980, 1990, 2001, and 2008—that decline usually comes with recessions and there are no exceptions to the rule.
commotion continued in the crypto world like The FTX debacle unravelsnow also reported to be former billionaire crypto hero Sam Bankman-Fried under investigation by the US Securities and Exchange Commission as his exchange seeks monetary relief. Bitcoin was trading around $17,300 on Friday morning.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc