U.S. stocks extended this week's dramatic ascent on Friday after deceleration in CPI inflation data ignited the most intense rally on Wall Street since early 2020.
The S&P 500 (^GSPC) rose 0.9%, notching its biggest winning week since June, while the technology-heavy Nasdaq Composite (^IXIC) gained 1.9%. The Dow Jones Industrial Average (^DJI) closed up modestly higher, up 0.1%, lagging behind the other indexes.
All three major averages skyrocketed Thursday, each recording their largest one-day advances since a rebound from the throes of the COVID crash more than two years ago. Outsized moves were catalyzed by lighter October consumer price data that fueled bets the Federal Reserve may halt the tightening of financial conditions as soon as early next year. The S&P 500, Dow, and Nasdaq soared 5.5%, 3.7% — or 1,200 points — and 7.4%, respectively.
On Thursday, Treasury yields and the U.S. dollar index posted their steepest one-day decline since the Global Financial Crisis more than a decade ago. The bond market was closed for Veteran's Day on Friday.
A reversal in China's Zero-COVID policy to reduce the amount of time in quarantine travelers to the country spend buoyed sentiment in early trading. Oil markets advanced as traders speculated the move may stoke a boost to commodity demand, with West Texas Intermediate (WTI) futures bouncing nearly 3% to above $88 per barrel.
Meanwhile on the economic data front, the University of Michigan's preliminary reading on its consumer sentiment survey for November fell to 54.7 from. 59.9 in October, the lowest since July.
“Overall, the report suggests that peak inflation may finally be behind us, though inflation may remain elevated for a while,” BNY Mellon Investment Management Head of U.S. Macro Sonia Meskin said of the CPI report in a note Thursday.
She noted that the figure supports the smaller 0.50% rate increase for December telegraphed at this month’s FOMC meeting, which investors are pricing in.
“However, it is also important to not over-emphasize one report for inflation and policy trajectory,” she added.
The Consumer Price Index (CPI) in October rose at an annual 7.7% and increased 0.4% over the month. On a "core" basis, which strips out the volatile food and energy components of the report, prices rose at a clip of 6.3% year-over-year and 0.3% on a monthly basis.