Nasdaq Index, Dow Jones, S&P 500 News: US Stocks Surge on Optimism Over Cooling Inflation

Highlights

• October CPI data shows inflation slowing
• U.S. stocks rally, Treasury yields fall
• Investor optimism hints at bullish short-term outlook

Bulls React Positively to CPI Data

In a notable shift, U.S. stock indexes are set for significant gains following the release of October’s inflation data, indicating a potential pause in the Federal Reserve’s rate hikes. The Consumer Price Index (CPI) remained stable, reflecting a slowdown in underlying inflation, with a notable decrease in gasoline prices. Annually, the CPI rose 3.2%, a drop from September’s 3.7%, and slightly below forecasts. Core prices, excluding food and energy, rose by 4.0%, also below the anticipated 4.1%.

Cash Market Response and Rate Expectations

This subdued inflation has sparked optimism among investors, leading to the erasure of bets on further Fed rate hikes, and a shift towards predictions of rate cuts by May. U.S. Treasury yields have fallen in response, with the two-year yield hitting a two-week low. Major growth stocks like Nvidia, Alphabet, Amazon, and Tesla saw premarket rises ranging from 1.8% to 4.3%.

Earnings Season and Future Policy

Wall Street’s main indexes have rebounded this November, driven by strong earnings and the belief that interest rates are nearing their peak. However, Federal Reserve Chair Jerome Powell’s recent statements suggest further tightening if inflation targets aren’t met. Upcoming testimonies from Fed officials and U.S. legislative negotiations on government funding will be closely watched for more cues.

Market Open and Individual Stock Movements

At cash market open, the Dow, S&P 500, and Nasdaq showed significant increases. Snap Inc’s shares rose following a partnership with Amazon, while Home Depot gained after exceeding profit estimates. Conversely, Fisker’s shares dropped due to production cuts and financial reporting issues.

Short-Term Forecast

Given the latest data and market reactions, the short-term outlook appears optimistic, and  bullish. However, the focus remains on the Fed’s future actions and broader economic indicators.

Technical Analysis

E-mini S&P 500 Index Futures are currently priced at 4486.25, which positions them above both the 200-day moving average of 4284.17 and the 50-day moving average of 4365.90. This placement above the key moving averages suggests a bullish trend in the short to medium term.

The current price is also above the minor support level of 4424.50 but has not yet reached the minor resistance at 4494.00. Approaching this resistance level, the market sentiment leans towards bullishness, especially considering the asset’s position relative to these significant averages and support levels.

The outlook remains optimistic as long as the price maintains above these averages and key support levels.