By Yasin Ebrahim
Investing.com -- The Dow rallied Thursday, as inflation dropped to a nine-month low, delivering a blow to Treasury yields and sparking a sea of the green in tech stocks amid hopes for the Federal Reserve to lean less hawkish on rate hikes.
The Labor Department said Thursday its consumer price index rose 0.4% last month, confounding expectations for a 0.6% rise. Core inflation , which is considered a more accurate gauge of inflation slowed to 0.3% from 0.6%, versus expectations for a 0.5% rise.
“The softening of core inflation in the October release is welcome news for the Fed,” Morgan Stanley said in a note. But cautioned that the optimism over slowing inflation could be unraveled should incoming data show labor markets remain tight.
The prospect of a less hawkish Fed pushed Treasury yields lower, with the 2-year Treasury yield, which is sensitive to Fed policy, falling to two-week lows, helping big tech surge.
But some on Wall Street aren't convinced that the tech rally will last, partly attributing the move higher to investor positioning, a day ahead of the expiry of options and highlighting that the Fed is still set to hike rates, albeit at a slower pace.
"I'm suspect of it in the short term," Brian Mulberry, client portfolio manager at Zacks Investment Management told Investing.com's Yasin Ebrahim in an interview on Thursday. "When all of these options expire tomorrow, we’ll get a better evaluation of where people actually think valuation should be. "
"At the end of the day, a less hawkish fed still means rates are going higher. Less hawkish is not a pivot...that's not how we're viewing this at this moment in time," Mulberry added.
Consumer stocks also reigned supreme with Amazon (NASDAQ: AMZN ) leading the charge, up more than 12% on bets that slowing inflation pressure could ease the squeeze on consumers and encourage further spending.
Rising homebuilders, led by PulteGroup Inc (NYSE: PHM ), played a role in the market melt-up as bets on smaller Fed rate hikes pushed mortgage rates back below 7%, spurring optimism for renewed demand for new homes.
The average rate on the 30-year fixed plunged 60 basis points from 7.22% to 6.62%, Mortgage News Daily reported on bets that the smaller rate hikes could help
In earnings news, Six Flags Entertainment New (NYSE: SIX ) surged more than 13% despite reporting quarterly results that fell short of Wall Street estimates. The theme park operator, however, also said it had struck an agreement with investment firm H Partners allowing the latter to up its stake in the company to 19.9% from 14.9%.
Bumble (NASDAQ: BMBL ), meanwhile, cut its losses to close 10% higher amid the broader market rally even after delivering softer guidance and third-quarter revenue that missed analyst estimates as the impact of a stronger dollar and the ongoing Russia-Ukraine war weighed.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.