Nov 10, 2022 - Economy & Business

Stocks soar after the cooler inflation report

Pedestrians pass in front of the New York Stock Exchange earlier this week. Photo: Michael Nagle/Bloomberg via Getty Images

The stock market boomed after Thursday's softer-than-expected inflation report: the S&P 500 closed up over 5%, while the tech-heavy Nasdaq Composite jumped 7% — the biggest rally in more than two years.

Why it matters: Signs of easing price pressures are helping to feed a powerful recovery for a stock market battered by the Federal Reserve's sharp rate hikes and fears of a hard landing.

  • The bond market rallied, too. The yield on the 10-year Treasury note dropped more than 30 basis points to 3.81%, the biggest single-day drop since 2009.

Where it stands: Financial markets have endured a brutal sell-off in recent months. Even with Thursday's big gains, the S&P 500 is still down 17% so far this year.

  • The selloff has been welcomed by the Fed. So-called tightening financial conditions is how the Fed slows demand. The opposite, loosening financial conditions, may put the Fed in a potentially tricky spot — particularly if it persists.
  • The inflation report gives Fed policymakers cover to dial back rate hikes to a (still huge) half-point move. But chair Jerome Powell went to great lengths last week to signal to markets that slowing doesn't mean the central bank is backing down from its inflation fight.
  • A parade of Fed officials welcomed Thursday's softer inflation reading, but warned the battle against inflation is far from over. Speaking at a conference in Houston, Dallas Fed president Lorie Logan said: "This morning's [Consumer Price Index] data were a welcome relief, but there is still a long way to go."

Go deeper: Inflation cools more than expected in October

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