Nasdaq, S&P 500 end sharply higher, fueled by inflation optimism
The S&P 500 and Nasdaq ended sharply higher on Friday, extending a rally started the day before after a soft inflation reading raised hopes the Federal Reserve would get less aggressive with U.S. interest rate hikes.
Amazon AMZN.O jumped 4.3%, with Apple AAPL.O and Microsoft MSFT.O both up more than 1% and contributing to the Nasdaq’s gain.
On Thursday, the S&P 500 and the Nasdaq racked up their biggest daily percentage gains in more than 2-1/2 years as annual inflation slipped below 8% for the first time in eight months.
Declines in healthcare stocks limited the Dow Jones Industrial Average’s gain, with UnitedHealth Group UNH.N down 4.1% for the day.
“What we’re really seeing today is simply a follow-through on yesterday. There’s a lot of cash sitting on the sidelines that is being put to work,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
“Perhaps it signals some type of bottom being put in the market, some type of line drawn in the sand. But even if we put in a bottom, we’re a long way away from setting new highs,” Ghriskey said.
Investors see an 81% chance of a 50-basis point rate hike in December and a 19% chance of a 75-basis point hike, according to CME Fedwatch tool.
Adding some nervousness on Wall Street, crypto exchange FTX said it would start U.S. bankruptcy proceedings and that CEO Sam Bankman-Fried resigned due to a liquidity crisis that prompted intervention from regulators around the world.
The S&P 500 climbed 0.93% to end the session at 3,993.05 points.
The Nasdaq gained 1.88% to 11,323.33 points, while Dow Jones Industrial Average rose 0.10% to 33,749.18 points.
Volume on U.S. exchanges was relatively heavy, with 13.5 billion shares traded, compared to an average of 12.0 billion shares over the previous 20 sessions.
Of the 11 S&P 500 sector indexes, six rose, led by energy .SPNY , up 3.07%, followed by a 2.48% gain in communication services .SPLRCL .
The S&P 500 growth index .IGX , which includes interest rate-sensitive technology stocks, rose 1.6%, beating the value index’s .IVX gain of 0.3%.
For the week, the S&P 500 rose 5.9%, the Dow added 4.15% and the Nasdaq jumped 8.1%. It was the S&P 500’s biggest weekly gain since June and the Nasdaq’s largest weekly gain since March.
Worries about an economic downturn have hammered Wall Street this year. The S&P 500 remains down about 16% year to date, on course for its biggest annual decline since 2008.
U.S.-listed shares of Chinese companies rose, with Alibaba Group Holding Ltd BABA.N gaining 1.4% after China eased some of its strict COVID-19 rules.
Advancing issues outnumbered falling ones within the S&P 500 .AD.SPX by a 1.7-to-one ratio.
The S&PCore services prices rose 0.5%. Away from rents and other services, goods disinflation is broadening.
Prices of used cars and trucks plunged 2.4%. The cost of apparel declined for the second straight month as retailers offered discounts to move unwanted inventory.
There were also decreases in prices of furniture and bedding as well as appliances. As a result, core goods prices fell 0.4% after being unchanged in September, a function of slowing demand and recovering fractured global supply chains.
Airline fares declined 1.1%. Healthcare costs fell 0.5% as the government incorporated updated data used to estimate health insurance prices.
“The BLS methodology measuring health insurance prices has provided upward price pressure the last twelve months but should now give downward pressure the next year,” said Will Compernolle, a senior economist at FHN Financial in New York.
The core CPI increased 6.3% in the 12 months through October after jumping 6.6% in September.