Wall St rallies as data supports view Fed may be done hiking rates

It was a big shot straight up right out the gate this morning on all three indexes with the Dow up about 600 by 11 a.m. and staying there all day until a modest drop in the final minutes to close up just under 500. There were similar dramatic jumps on both the Nasdaq and Dow. The huge rally was triggered by CPI data that beat estimates with October price rises coming in at 3.2% vs September’s 3.7%, the smallest rise in two years.  The softening inflation gave a big boost to rate cut projections now estimated at 65% in May compared to 34% just yesterday. There remain concerns about the funding bill facing an end of the week government shutdown. Volume was considerably above average at 12.6 billion. 

Wall St rallies as data supports view Fed may be done hiking rates

By Caroline Valetkevitch

Tue November 14, 2023 4:52 PM

DJ: 34,337.87  +54.77         NAS: 13,767.74  -30.36        S&P: 4,411.55  -3.69        11/13

DJ: 34,827.70  +489.83       NAS: 14,094.38  +326.64     S&P: 4,495.70  +84.15     11/14

NEW YORK, Nov 14 (Reuters) - The S&P 500 and Nasdaq posted their biggest daily percentage gains since April 27 on Tuesday as softer-than-expected inflation data supported the view that the Federal Reserve may be done raising interest rates.  The small-cap Russell 2000 index (.RUT) jumped 5.4%, outperforming the broader market, while the rate-sensitive S&P 500 real estate sector (.SPLRCR) gained 5.3% and utilities (.SPLRCU) rose 3.9%. All three registered their biggest daily percentage increases since Nov. 10, 2022.  Data showed U.S. consumer prices were unchanged in October as Americans paid less for gasoline, and the annual rise in underlying inflation was the smallest in two years. In the 12 months through October, the CPI climbed 3.2% - below economists' estimates - after rising 3.7% in September.

"The clear catalyst was the softer-than-expected inflation report," said Craig Fehr, head of investment strategy at Edward Jones.  "Getting some softer inflation readings provided markets some additional comfort that the Fed isn't going to have to put in place a significant amount of additional restrictive policy to continue to bring consumer prices lower."  Since March 2022, the Fed has hiked its policy rate 525 basis points to combat high inflation.

The Dow Jones Industrial Average (.DJI) rose 489.83 points, or 1.43%, to 34,827.7; the S&P 500 (.SPX) gained 84.15 points, or 1.91%, at 4,495.7; and the Nasdaq Composite (.IXIC) added 326.64 points, or 2.37%, at 14,094.38.  Also, the KBW regional banking index (.KRX) rose 7.5% in its biggest daily percentage rise since January 2021. 

"It's difficult with higher rates with the commercial real estate on their balance sheets," said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.  Expectations on the Fed cutting rates next year also shifted following the day's data. U.S. rate futures on Tuesday priced in a 65% chance of a rate cut in May, compared with 34% late on Monday, according to the CME's FedWatch tool.  Investors also focused on negotiations by U.S. lawmakers over a funding bill as they face an end-of-week deadline to fund the federal government.

Among individual stocks, Snap Inc shares (SNAP.N) jumped 7.5% following news that Amazon.com (AMZN.O) will allow Snapchat users in the United States to buy some products listed on the ecommerce company directly from the social media app.  Home Depot (HD.N) gained 5.4% after the U.S. home improvement chain beat quarterly profit estimates. 

Volume on U.S. exchanges was 12.62 billion shares, compared with the 11.09 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered decliners on the NYSE by a 9.80-to-1 ratio; on Nasdaq, a 3.59-to-1 ratio favored advancers.  The S&P 500 posted 45 new 52-week highs and no new lows; the Nasdaq Composite recorded 106 new highs and 139 new lows.