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Dow rallies 600 points in huge market reversal after hot inflation data

Three experts react to September's hotter than expected inflation report

Stocks rose in choppy trading on Thursday, recovering from sharp losses earlier in the session, as traders considered the latest US inflation data and what it means for the Federal Reserve going forward.

The Dow Jones Industrial Average rose 518 points, or 1.78%, recovering from a 500-point drop earlier in the day. The S&P 500 rose 1.64% and the Nasdaq Composite rose 1.43%.

Shares recovered after hitting their lowest levels since 2020 led by gains in energy and banking stocks. Shares in Chevron rose more than 3% as oil prices rose, and banking stocks Goldman Sachs and JPMorgan gained 2.9% and 4%, respectively. A reversal in big tech names such as Apple and Microsoft and an increase in semiconductors Nvidia and Qualcomm also helped to go higher.

Additionally, investors can bet that the stronger-than-expected inflation report means price increases will peak soon.

“We get this last gasp higher in inflation and from here we start to slow down,” said Liz Ann Sonders, investment strategist at Charles Schwab. However, she added that volatility in stocks is likely to continue as investors digest more inflation data and the earnings season begins.

“I think there are still a lot of things that can drive volatility, and intraday swings are just the nature of the beast right now,” she said.

Earlier, stocks fell to session lows when the September consumer inflation report was higher than economists expected. The consumer price index rose 0.4% for the month, more than the 0.3% forecast by the Dow Jones. On an annual basis, inflation was up 8.2 per cent.

Thursday’s CPI report comes a day after the government said the producer price index, another gauge of inflation, rose more than expected.

Investors also digested minutes from the Federal Reserve’s September meeting, released Wednesday. The report showed that the central bank expected to continue raising interest rates until it sees inflation slowing. But one comment led some to believe the Fed would instead slow rate hikes, if not roll them back, if the turmoil in financial markets continued.

Going forward, investors will see the start of the earnings season. On Friday, all major banks JPMorgan Chase, Wells Fargo, Morgan Stanley and Citigroup report results.

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