Stock Market Today: Stocks Rally Despite Hot Inflation Report

Last updated: 4:08PM EST

Stock indices finished today’s trading session in the green despite a higher-than-expected inflation report. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 rallied 2.83%, 2.59%, and 2.3%, respectively.

All sectors saw gains today. Nonetheless, the consumer discretionary sector was the session’s laggard, as it increased by 1.11%. Conversely, the energy sector was the session’s leader, with a gain of 4.07%.

Furthermore, the U.S. 10-Year Treasury yield increased to 3.96%. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.48%. This brings the spread between them to -52 basis points.

Compared to yesterday, the market is pricing in a higher chance of a higher Fed Funds rate for the end of the year. In fact, the market’s expectation for a rate in the range of 4.25% to 4.5% has plummeted to 27.4%, way lower than yesterday’s expectations of 58%.

In addition, the market is now also assigning a 70.7% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 32.5% chance yesterday.

Stocks Continue to Rally; Gasoline Prices Trending Higher

Last updated: 2:00PM EST

Stocks are green heading into the final two hours of today’s trading session. As of 2:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 2.7%, 2.4%, and 2%, respectively.

In addition, WTI crude oil is also up today as it hovers around $89.45 per barrel. Although the commodity is well off its yearly highs, its recent uptrend has led to prices at the pump gaining upward momentum across the country.

Indeed, the national average for regular gas was last $3.913 per gallon, up from last week’s reading of $3.867. Still, this remains significantly lower than the all-time high of $5.016 per gallon on June 14.

The highest prices can be found in California, where prices are substantially higher than the national average, at $6.196 per gallon. On the other hand, Georgia is the state with the lowest gas prices, at $3.267 per gallon.

It’ll be interesting to see if this upward trend will continue going forward as the Federal Reserve looks to raise interest rates to fight inflation while oil producers lower production in order to maintain the price.

Indices Reverse Earlier Losses and Turn Positive

Last updated: 11:44AM EST

Stocks reverse earlier losses and turn positive. As of 11:44 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 2.15%, 2.08%, and 1.96%, respectively.

The consumer discretionary sector (XLY) is the laggard so far, as it is up 0.85%. Conversely, the energy sector (XLE) is the session’s leader with a gain of 3.96%.

Furthermore, the U.S. 10-Year Treasury yield increased to 3.97%, an increase of 7.4 basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.45%.

Indices Fall after Core Inflation Rate Accelerates

Last updated: 10:00AM EST

Stock Indices are in the red to start today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 1%, 1.4%, and 2.1%, respectively. This is the result of a hotter-than-expected inflation report (see CPI results in the previous update).

Although year-over-year CPI is trending lower (although it’s still too high), year-over-year core CPI, which strips out volatile categories such as energy and food, is accelerating.

Indeed, it increased 6.6% year-over-year compared to 6.3% in the previous month and higher than the 6.5% expected. On a month-over-month basis, it increased by 0.6%, which was also higher than the 0.5% expected.

Today’s inflation report not only confirms that inflation has not peaked but that it is also accelerating higher than anticipated. Therefore, the Federal Reserve will have to raise rates significantly above the neutral rate, going forward.

In addition, the Department of Labor released its Initial Jobless Claims report, which came in worse than expected. In the past week, 228,000 people filed for unemployment insurance for the first time. Expectations were for 225,000 individuals.

When using the four-week average, initial jobless claims were 211,500, up from last week’s reading of 206,500. It’s worth noting that this figure has been in a downtrend since mid-August.

In addition, Continuing Jobless Claims, which measures the number of unemployed people who qualify for unemployment insurance, came in at 1.368 million. This was above the forecast of 1.365 million and higher than last week’s print, which was also 1.365 million.

Continuing Jobless Claims are currently sitting near their lowest levels since 1970. Relatively speaking, this suggests that individuals aren’t struggling to find other jobs after being laid off.

However, it’ll be interesting to see what will happen going forward as the Federal Reserve’s tightening policy slowly begins taking effect.

Indices Nose Dive after Inflation Remains Red Hot

Last updated: 8:33AM EST

The U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) data indicated that CPI was up 0.4% in September on a seasonally-adjusted basis, higher than the median forecast of 0.3%. Over a period of twelve months, the CPI index rose to 8.2% before seasonal adjustment, again above forecasts of 8.1%.

Futures on the Dow Jones Industrial Average (DJIA) dropped 1.5%, while those on the S&P 500 (SPX) nosedived by around 2%, as of 8:43 a.m. EST, Thursday. Meanwhile, the Nasdaq 100 (NDX) futures tanked 2.8%.

First Published: 5:31AM EST

Stock futures were up early on Thursday as investors move on from a desirable growth in the producer price index (PPI) and look forward to the consumer inflation data and key earnings later today.

Futures on the Dow Jones Industrial Average (DJIA) climbed 0.43%, while those on the S&P 500 (SPX) gained 0.45%, as of 6.25 a.m. EST, Thursday. Meanwhile, the Nasdaq 100 (NDX) futures advanced 0.23%.

Producer Price Increase Could Be a Positive

September’s PPI was released on Wednesday and came in higher than expected. At 0.4% month-over-month growth, the figure was above the consensus estimate of 0.2%. Growth in wholesale prices can be considered good news for the economy if looked at from a different perspective, as it indicates that consumers are willing to pay more for retail goods. This means demand is still strong enough to keep an economy from crashing.

Investors did not take the PPI data with much enthusiasm, and stock activity remained mild. The S&P 500, the Dow, and the Nasdaq 100 ended the regular trading session Wednesday with 0.33%, 0.1%, and 0.05% losses, respectively.

CPI Release Takes the Center Stage on Thursday

Contrary to PPI, investors look for a lower consumer price index (CPI), which would indicate that inflation is cooling down. September’s CPI data is set to be out later on Thursday and has undoubtedly been the highlight of the week.

Economists surveyed by the Dow Jones expect the CPI to have risen 0.3% in September, up from 0.1% in August. This indicates an annual rate of around 8.1%, which is lower than August’s 8.3%.

If the figure comes in as expected or even lower, there are chances of a short bear-market rally occurring in response. However, the sentiment of investors should be taken with a grain of salt, as the inflation is still too high for the policy to be easing.

Fed’s September Meeting Indicates More Interest Rate Hikes

Wednesday also saw the release of the Federal Reserve’s September meeting minutes. As expected, all points indicated that the central bank is committed to its hawkish stance on inflation.

The next FOMC meeting is to be held over the course of November 1 and 2, and the Fed is likely to make another 75 basis point interest rate hike, based on the goal of a 2% annual inflation rate.

Updates to Keep an Eye on

Thursday also holds some key earnings reports from big names like Delta Air Lines (NYSE:DAL), retail pharmacy player Walgreens (NYSE:WBA), and Domino’s Pizza (NYSE:DPZ). Mega earnings are expected on Friday from banking stalwarts JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), and many more.

Weekly jobless claims for last week will also be released on Thursday, giving us a peek into the weekly trends in the job market.

Meanwhile, semiconductor stocks continue to be volatile as major American chip companies like KLA Corp. (NASDAQ:KLAC) and Lam Research (NASDAQ:LRCX) withdraw from partnerships with leading Chinese chipmaker Yangtze Memory Technologies Co. (YMT). The news comes amid another round of restrictions on chip trade with China by the Biden administration.

In another major news, a joint-deal to acquire nuclear-services firm Westinghouse Electric by Brookfield Renewable Partners (NYSE:BBU) and uranium producer Cameco Corp. resuscitated the U.S.’s nuclear-power industry after its multi-year decline. This deal is a major catalyst for the global push for carbon-free electricity generation.

The deal opens a new opportunity for the appreciation of renewable energy stocks.

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