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Stocks Soar as CPI Increases, Treasury Yields Drop

Following the October CPI report of consumer prices, which bolstered confidence that inflation has peaked, stocks jumped. There was an 800+ point increase in the Dow Jones Industrial Average. S&P 500 increased by 4.2%. NASDAQ Composite rose 5.8%.

The Dow experienced its largest one-day gain during the session, rising more than 1,000 points, or more than 3% since equities began to recover from the pandemic bad market in 2020.

The consumer price index for October increased just 0.4% for the month and 7.7% from a year earlier, which was a decrease from the previous month’s 8.2% annual rate and the lowest annual increase since January.

According to Dow Jones, economists were anticipating gains between 0.6% and 7.9%. The so-called core CPI, which excludes volatile food and energy prices, climbed 0.3% for the month and 6.3% annually, both less than anticipated.

Dow Industrials

The Nasdaq, which has been a glaring underperformer in the market advance thus far, surged to cross its 50-day line. 

Leading the way were Amazon, other overvalued megacaps, and cloud companies, while Nvidia and other chips continued their recent uptrend, mainly trading below buy zones.

The trading on Thursday was a continuation day for all the main indices, with significant volume rises on the NYSE and Nasdaq. The stock market rally has more confidence as a result.

Nasdaq Composite Index

The 10-year Treasury yield dropped more than 18 basis points to 3.946% on the release of the CPI report as traders wagered that the Federal Reserve will pause its hawkish tightening program that has dragged on markets all year.

A basis point is equal to 0.01%, therefore the yield on the 2-year Treasury fell by more than 23 basis points to 4.395%. Another recent pressure factor for stocks, the U.S. Dollar, fell to its worst day against a basket of other currencies since 2015.

Tech companies, which have been hammered the hardest by rising prices and interest rates, led the surge on Thursday. Amazon’s stock increased by 13%. Each of Apple, Meta, and Microsoft saw gains of above 6%. Meta’s stock increased by 5.4%. Tesla increased by 5.3%.

Stocks of semiconductor companies like Lam Research and Applied Materials both saw gains of more than 5%. Also rising 3.7% was KLA.

The rally for a comeback that started in mid-October but stalled in recent weeks was revived by Thursday’s gain. 

On Thursday, the S&P 500 surpassed the crucial market resistance level of 3,900, and the Dow reached its highest point since August. 

Commodity Prices Rise

Commodities rose alongside the stock market on Thursday, with Brent oil rising 0.9% and West Texas Intermediate crude rising 0.6%. Metals were up multiple percentage points, with palladium and platinum leading the way, up 5.7% and 5.6%, respectively. 

Spot gold rose 2.8%, while US gold futures rose 2.5% and silver rose 3.1%.

Markets are cheering the lower inflation print, and expectations for a rate cut have begun, with the December 14th rate hike anchored at 50 basis points. 

Still, markets must digest Friday’s University of Michigan Consumer Sentiment Survey, which includes consumer 5-year inflation predictions, which have risen to an unsettling 2.9%.

UK GDP Falls By 0.6%

The UK economy seems to be headed to for a long recession as the Gross domestic product (GDP) is estimated to have fallen by 0.6% in September 2022, after a fall of 0.1% in August 2022 (revised from a fall of 0.3% in our previous publication) driven by a fall in the services sector.

Looking at the quarterly picture, GDP fell by 0.2% in the three months to September 2022 compared with the three months to June 2022. 

Services fell by 0.8% in September 2022 after growth of 0.1% in August 2022 (revised from a fall of 0.1% in our previous publication).

The largest contribution to the fall came from a 3.2% fall in information and communication activity, and a 2.0% fall in wholesale and retail trade, and repair of motor vehicles and motorcycles.

Q3 Earnings Results

The S&P 500 Index, which serves as the benchmark for the market, has seen a progressive fall in third-quarter profit expectations during the past three and a half months. As of Nov. 9, results had been disclosed by 453 S&P 500 Index companies.

These companies’ overall profits increased by 2.6% over the same period the previous year on 12.4% higher revenues, surpassing predictions in both EPS and revenue by 69.3% and 68%, respectively. 

According to the most recent projection, the S&P 500 Index’s overall earnings will increase by 1.5% on the back of 11.4% greater revenue.

On Friday the below companies are expected to announce the earnings before the opening or after the close of market.

TickerCompanyMarket CapFiscal Quarter EndingEPS#of ETSLast Year Report DateLast Year EPS
SMFGSumitomo Mitsui Financial Group Inc$40,245,455,716Sep/2022$0.17$1.0011/12/2021$0.33
MFGMizuho Financial Group, Inc.$27,742,864,144Sep/2022$0.09111/12/2021$0.09
SJRShaw Communications Inc.$13,319,029,230Aug/2022$0.30110/29/2021$0.40
AQNAlgonquin Power & Utilities Corp.$7,537,382,096Sep/2022$0.16511/11/2021$0.15
CSANCosan S.A.$6,582,352,705Sep/2022N/A11/12/2021$1.34
ERJEmbraer S.A.$1,906,298,947Sep/2022$0.15211/05/2021-$0.18
VIVOMeridian Bioscience Inc.$1,388,998,015Sep/2022$0.15211/12/2021$0.23
PLLPiedmont Lithium Inc.$1,131,582,625Dec/2022-$0.401N/AN/A
ORLAOrla Mining Ltd.$1,090,616,991Sep/2022$0.03111/15/2021-$0.04
HOLIHollysys Automation Technologies, Ltd.$1,084,353,795Sep/20221N/AN/A

In the meantime, the markets in the US will be closed for Veterans Day on Friday. In Canada, markets will also be taking a long weekend break for Remembrance Day. 

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Author

  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.

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