A Wall Street rally sent the Nasdaq up 20% on fears of a slowdown in inflation

  • The Fed has now offered a 50 bps hike in September
  • US consumer price growth slows in July
  • Musk is selling $6.9 billion worth of Tesla stock
  • Volatility index closes at four-month low

NEW YORK, Aug 10 (Reuters) – Wall Street rose on Wednesday, with the Nasdaq 20% higher than in June, after U.S. inflation fell more than expected in July and raised hopes that the Federal Reserve will be less aggressive in raising interest rates. .

A sharp decline in gasoline prices helped the U.S. consumer price index remain steady last month after advancing 1.3% in June, the Labor Department said. CPI fell by a better-than-expected 8.5% over the past 12 months after a 9.1% rise in June. read more

The rally came after the first significant sign of relief for Americans, who have seen inflation steadily climb. The Nasdaq is now up 20.8% from the bottom, but will need to surpass its previous peak in November to confirm a new bull market.

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Fed fund futures traders are now pricing in just a 43.5% chance the U.S. central bank will raise rates by 75 basis points when it meets in September, up from 68% before the data. A 50 basis point hike is considered a 56.5% probability. read more

“For the market, it’s a Goldilocks situation right now because you have the labor market and inflation starts to come down. That’s going to be like a soft landing,” said Shawn Snyder, Citi’s head of investment strategy. American Wealth Management in New York.

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But Snyder said a one-month drop in inflation was not enough to send a clear signal to the central bank.

The rally on Wall Street was broad-based, with all 11 S&P 500 sectors rising in the green. Growth stocks (.IGX) higher than value (.IVX)While Dow Transports (.DJT)Small caps (.RUT) and semiconductors (.SOX) And higher.

Dow Jones Industrial Average (.DJI) The S&P 500 rose 535.1 points, or 1.63%, to 33,309.51. (.SPX) The Nasdaq Composite rose 87.77 points, or 2.13%, to 4,210.24. (.IXIC) It added 360.88 points, or 2.89%, to 12,854.81.

That was the largest single-day gain in two weeks for both the Nasdaq and the S&P 500, and the largest single-day gain in three weeks for the Dow. It was the highest close for the S&P 500 since early May.

“(Inflation) is still very high at 8.5%, but there is hope that maybe June will peak,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

Frederick said Thursday that producer price data for July and August inflation and employment data released next month could change the Fed’s stance again.

The central bank has raised its policy rate by 225 basis points since March.

Traders work on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, USA on August 8, 2022. REUTERS/Andrew Kelly

The drop in inflation was the first “positive” reading on price pressures since the central bank began tightening policy, Chicago Fed President Charles Evans said, even as he signaled the central bank still has work to do. read more

After a rough start to the year, the S&P 500 has risen nearly 15% since mid-June, largely on expectations that the Fed will do less than expected in its efforts to provide a soft landing for the economy. inflammation

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But the S&P 500 is 12% below its all-time high in January and has been in a bear market ever since.

CBOE Volatility Index (.VIX)Wall Street’s fear gauge fell below the 20.00 level to close at a more than four-month low.

High-growth and megacap technology stocks, whose valuations are vulnerable to rising bond yields, rose as Treasury yields fell sharply across the board. Apple Inc (AAPL.O)Alphabet Inc (GOOGL.O)Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O) All rose more than 2% each.

Economy based banks (.SPXBK) Goldman Sachs Group Inc advanced 2.7% (GSN) and Morgan Stanley (MSN) Each climbs about 3%.

“Banks are not doing well and are being bid up now,” said Thomas Hayes, managing member of Great Hill Capital LLC.

Tesla Inc (TSLA.O) Elon Musk rose 3.9% after selling $6.9 billion worth of shares in the electric vehicle maker to fund a potential deal for Twitter Inc. (TWTR.N) If he loses his legal battle with the social media platform. Twitter rose 3.7%. read more

Meta Platforms Inc (META.O) Facebook rose 5.8% after its parent said Tuesday it raised $10 billion in its first bond offering. read more

Volume in US equities was 11.33 billion shares compared to the full session’s average of 10.98 billion over the past 20 trading days.

Advancing issues outnumber declining issues on the NYSE by a 5.69-to-1 ratio; On the Nasdaq, a 3.34-to-1 ratio favored the advancers.

The S&P 500 posted five new 52-week highs and 29 new lows; The Nasdaq Composite posted 64 new highs and 54 new lows.

Report by Herbert Lash; Additional reporting by Bansari Mayur Kamdar, Anirudha Ghosh, Shruti Shankar, Medha Singh and Karina D’Souza in Bangalore; Editing by Anil de Silva, Shaunak Dasgupta and Lisa Schumacher

Our Standards: Thomson Reuters Trust Principles.

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