Wall Street lives the party of the year due to low inflation

The New York Stock Exchange indices closed sharply higher on Thursday, with the NASDAQ Composite gaining 7.35%, on its best day since April 6, 2020, celebrating the moderation of inflation in the United States.

The Dow Jones index gained 3.69% and the expanded S&P 500 index, more representative of the general market trend, added 5.53 percent.

Thus, the S&P 500 closed at 3,956.31 points, while the NASDAQ Composite reached 11,114.15 units and the Dow Jones Industrial Average stood at 33,715.37 integers.

The U.S. inflation data gives the Federal Reserve a respite from its current interest-rate hike cycle and raised hopes of a central bank pivot, financial analysts said.

In any case, they suggested that the Fed could shorten the stage of increases in reference rates.

The Consumer Price Index (CPI) rose 7.7% annually, below economists’ estimates of a 7.9% rise. However, on a monthly basis, the increase was just 0.4% in October, below estimates of a 0.6% increase.

Meanwhile, monthly core inflation, which excludes food and energy, rose 0.3%, below estimates of a 0.5% rise.

The sharp gains on Wall Street came on the heels of the CPI release, with the 10-year Treasury yield falling 20 basis points, and eventually 31 basis points. Meanwhile, the dollar index fell more than 2%, on its weakest day in more than a decade.

Thursday’s stock move in New York did not come as a surprise to analysts at JPMorgan, who estimated that a 7.7% CPI reading would lead to a 2.5%-3.5% rise in the S&P 500.

“The markets are back to believing in the change,” said Callie Cox, US analyst at eToro.

“Although we continue to expect inflation to pick up a bit in the coming months, this Thursday’s data increases our confidence in our expected range of 4.5 to 5% in which the Fed pauses,” said Tiffany Wilding. , analyst at PIMCO for North America.

This expectation translates into the fact that 80% of the market expects a rise of half a point, compared to 58% prior to knowing October’s inflation.

One of the Fed members who has given rise to optimism is Dallas Fed President Lorie Logan. “It will soon be appropriate to moderate the pace of tightening,” she said. “The road is still not easy.”

“The conclusion we draw from this report is that the Fed will take its foot off the accelerator in its monetary adjustments,” summarized John Kilduff of Again Capital.

The winners

One of the sectors that may benefit most from a smaller incision by the Fed is technology. Salesforce (+10.02%), Apple (+8.94%), Intel (+8.14%) and Microsoft (+8.23%) were among the best performers on Thursday, along with Meta (+10.25%).

The industrial sector has been one of the hardest hit on the stock market, which is why many companies in the industry have attractive prices, which facilitates their recovery. In this index only McDonald’s, Amgen and Merck are listed in red. On the other hand, the chip company AMD or Match Group, the owner of Tinder, gain more than 13% in the S&P 500.

Of the 11 sectors represented in the S&P 500, Information Technology was the biggest gainer on Thursday (+8.33%), followed by Real Estate (+7.75%) and Consumer Discretionary (+7.70%) in third place. ).

The sectors with the lowest returns were Health (+2.59%), Basic Consumption (+2.46%) and Energy (+2.22%). (With information from Agencies and elEconomista.es)

termometro.economico@eleconomista.mx