U.S. Stocks Showing Substantial Rebound On Tamer-Than-Expected Inflation Data

Stocks have shown a substantial move to the upside in morning trading on Tuesday, more than offsetting the pullback seen in the previous session. With the strong upward move, the Dow has reached a nearly three-month intraday high.

Currently, the major averages are off their highs of the session but remain sharply higher. The Dow is up 329.82 points or 1.0 percent at 33,866.52, the Nasdaq is up 288.19 points or 2.6 percent at 11,484.41 and the S&P 500 is up 65.19 points or 1.7 percent at 4,022.44.

The rally on Wall Street comes following the release of a Labor Department report showing producer prices in the U.S. crept up by much less than expected in the month of October.

The Labor Department said its producer price index for final demand inched up by 0.2 percent in October, matching a revised uptick in September.

Economists expected producer prices to climb by 0.5 percent compared to the 0.4 percent increase originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed to 8.0 percent in October from 8.4 percent in September. The year-over-year growth was expected to edge down to 8.3 percent.

Following last week’s tamer-than-expected consumer price inflation report, the data has added to optimism about the Federal Reserve slowing the pace of interest rate hikes as soon as next month.

“It’s premature to conclude a dovish Fed pivot is on the way, though Vice Chair Lael Brainard’s comments yesterday, on top of downside surprises in both October CPI and PPI reports, raise the odds,” said Will Compernolle, Senior Economist at FHN Financial.

CME Group’s FedWatch Tool is currently indicating an 85.4 percent chance the Fed will raise rates by 50 basis points next month and a 14.6 percent chance of another 75 basis point rate hike.

The strength on Wall Street also comes amid a surge by shares of Walmart (WMT), with the retail giant spiking by 7.6 percent.

The jump by Walmart comes after the company reported better than expected third quarter results and announced a $20 billion share buyback.

Semiconductor stocks have moved sharply higher in morning trading, driving the Philadelphia Semiconductor Index up by 4.1 percent to its best intraday level in well over two months.

Taiwan Semiconductor (TSM) is posting a standout gain on news Warren Buffett’s Berkshire Hathaway has bought more than $4.1 billion of the chipmaker’s stock.

Substantial strength has also emerged among airline stocks, with the NYSE Arca Airline Index soaring by 3.3 percent to a more than two-month intraday high.

Retail stocks are also turning in a strong performance following the upbeat earnings news from Walmart, as reflected by the 2.6 percent surge by the Dow Jones U.S. Retail Index.

Housing, brokerage and networking stocks are also seeing considerable strength on the day, reflecting broad based buying interest.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan’s Nikkei 225 Index inched up by 0.1 percent, while China’s Shanghai Composite Index jumped by 1.6 percent and Hong Kong’s Hang Seng Index spiked by 4.1 percent.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the U.K.’s FTSE 100 Index has fallen by 0.4 percent, the German DAX Index and the French CAC 40 Index are both up by 0.4 percent.

In the bond market, treasuries have moved back to the upside following the pullback seen on Monday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 7.5 basis points at 3.790 percent.

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