US stocks climbed after producer prices confirmed a slowdown in inflation, strengthening the case for the Federal Reserve to slow its pace of interest-rate hikes.
(Bloomberg) — US stocks climbed after producer prices confirmed a slowdown in inflation, strengthening the case for the Federal Reserve to slow its pace of interest-rate hikes.
The S&P 500 rose as much as 1.8% while the tech-heavy Nasdaq 100 soared as much as 2.8%. Both indexes were buoyed by gains in Apple Inc., Microsoft Corp. and Amazon.com Inc.. Walmart Inc.’s earnings, which topped estimates, also boosted sentiment and lifted stocks.
Treasuries rallied, with the 10-year yield declining to around 3.80%. The dollar fell and the pound rallied.
Markets have turned risk-on in recent days, trading off a softer-than-expected US CPI data print that many reckon will allow the Fed to raise rates in half-point increments, after consecutive hikes of three-quarters of a percentage point. That view was encouraged by Federal Reserve Bank of Philadelphia President Patrick Harker on Tuesday, who said he expects officials to slow the pace of interest-rate increases.
Vice Chair Lael Brainard made similar remarks at a Bloomberg event on Monday, even though she emphasized the central bank has “additional work” to do to tame inflation.
On Tuesday, October producer prices came in at 8% year-on-year, undershooting the 8.3% estimate and further easing inflation concerns.
“Taken alone, the data today supports the Goldilocks scenario, where growth is holding up very well — per the solid Empire Manufacturing report — but inflation pressures are rapidly easy — per the PPI print,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors LLC. “I think that supports the ongoing rally that you’ve seen over the past month, but I question where this narrative will hold up in the coming months.”
Meanwhile, Monday’s meeting between President Xi Jinping and Joe Biden generated hopes of warmer ties between the two superpowers. It came after Beijing had announced measures to support China’s beleaguered property sector, and to relax Covid curbs.
Read: Everything Is Suddenly Falling In Place for Chinese Stocks
Data showing Japan’s economy unexpectedly shrank in the third quarter, as well as softer-than-expected Chinese retail sales figures, highlighted risks for global growth.
Key events this week:
- Former US President Donald Trump plans to make an announcement, Tuesday
- US business inventories, cross-border investment, retail sales, industrial production, Wednesday
- Fed’s John Williams, Lael Brainard and SEC Chair Gary Gensler speak, Wednesday
- ECB President Christine Lagarde speaks, Wednesday
- Eurozone CPI, Thursday
- US housing starts, initial jobless claims, Thursday
- Fed’s Neel Kashkari, Loretta Mester speak, Thursday
- US Conference Board leading index, existing home sales, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 1.6% as of 10:27 a.m. New York time
- The Nasdaq 100 rose 2.6%
- The Dow Jones Industrial Average rose 1%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.7% to $1.0402
- The British pound rose 1.4% to $1.1916
- The Japanese yen rose 0.6% to 139.10 per dollar
Cryptocurrencies
- Bitcoin rose 3.4% to $16,950.18
- Ether rose 3.3% to $1,266.7
Bonds
- The yield on 10-year Treasuries declined six basis points to 3.79%
- Germany’s 10-year yield declined six basis points to 2.08%
- Britain’s 10-year yield declined four basis points to 3.33%
Commodities
- West Texas Intermediate crude fell 0.7% to $85.23 a barrel
- Gold futures fell 0.1% to $1,774.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Allegra Catelli, Tassia Sipahutar and Cecile Gutscher.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
