Stocks rose in choppy trading Thursday, recovering from sharp losses earlier in the session, as traders assessed the latest US inflation data and what it means for the Federal Reserve going forward.
The Dow Jones Industrial Average rose 822 points, or 2.8%, recovering from a 500-point drop earlier in the day. The S&P 500 is up 2.42%, and the Nasdaq Composite is up 2.07%.
The volatile session saw stocks drop to their lowest levels since 2020 after higher-than-expected inflation data and then posted a stunning recovery. The Dow Jones regained more than 1,300 points as traders digested the September CPI report. The S&P 500 recorded its widest trading range since March 2020, going from a 2.39% decline to a 2.39% high.
Gains in energy and banking stocks led the reversal. Shares of Chevron rose about 5% as oil prices rose, and shares of banks, Goldman Sachs and JPMorgan, rose 4.21% and 5.76%, respectively. reflection in Big tech names Such as Apple, Microsoft and a boom in semiconductors Nvidia and Qualcomm also contributed to the rise.
Investors may bet that a stronger-than-expected inflation report means that price increases will soon peak.
“Maybe we’re raising these recent inflation rates, and from there we’re starting to slow,” said Liz Ann Saunders, chief investment analyst at Charles Schwab. She added, however, that volatility in stocks is likely to continue as investors digest more inflation data and earnings season begins.
“I think there are still a lot of things that can lead to volatility and intraday volatility is just the nature of the beast at the moment,” she said.
Stocks fell to session lows when the September consumer inflation report showed a larger-than-expected increase. The CPI rose 0.4% during the month, more than the 0.3% estimate by Dow Jones. On an annual basis, the inflation rate rose by 8.2%. Continued high inflation could mean that the Fed is more aggressive with future interest rate hikes and keeping rates higher until rate increases subside.
Thursday’s CPI report comes a day after the government announced that the Producer Price Index, another inflation gauge, rose more than expected.
Going forward, investors will be watching the start of earnings season. On Friday, major banks JPMorgan Chase, Wells Fargo, Morgan Stanley and Citigroup announced their results.
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