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Wall Street’s rally lifts the Nasdaq 20% off the low as inflation fears ease

Wall Street's rally lifts the Nasdaq 20% off the low as inflation fears ease
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  • The Fed now plans to make a 50 basis point hike in September
  • US consumer price growth slows in July
  • Musk is selling $6.9 billion in Tesla stock
  • The volatility index closes at a four-month low

NEW YORK, Aug 10 (Reuters) – Wall Street rose sharply on Wednesday, taking the Nasdaq more than 20% above its June low after US inflation slowed more-than-expected in July, raising hopes that the Federal Reserve would become less aggressive in raising interest rates .

A sharp drop in gasoline costs helped keep the US CPI unchanged last month after rising 1.3% in June, the Labor Department said. CPI rose less-than-expected 8.5% over the trailing 12 months after rising 9.1% in June. Continue reading

The rally followed the first tangible sign of relief for Americans, who watched inflation rise steadily. The Nasdaq is now up 20.8% since bottoming but has yet to surpass its previous peak in November to confirm a fresh bull market.

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Fed fund futures traders are now pricing in just a 43.5% chance that the Federal Reserve will hike rates by 75 basis points when it meets in September, down from 68% before that date. A 50 basis point increase is considered a 56.5% probability. Continue reading

“It’s sort of a Goldilocks scenario for the market right now because the job market is holding up and inflation may be slowing down. This is what a soft landing would look like,” said Shawn Snyder, head of investment strategy at Citi US wealth management in New York.

But a month of decelerating inflation isn’t enough for the Fed to give the all-clear, Snyder said.

Wall Street’s rally was broad-based, with all 11 sectors of the S&P 500 rising in a sea of ​​green. growth stocks (.IGX) more than increased in value (.IVX)while Dow transports (.DJT)small caps (.ROOT) and semiconductors (.SOX) rose too.

The Dow Jones Industrial Average (.DJI) rose 535.1 points, or 1.63%, to 33,309.51, during the S&P 500 (.SPX) rose 87.77 points, or 2.13%, to 4,210.24 and the Nasdaq Composite (.IXIC) added 360.88 points, or 2.89%, to 12,854.81.

It was the biggest one-day gain for both the Nasdaq and S&P 500 in two weeks and the Dow in three weeks. It was the highest close for the S&P 500 since early May.

“(Inflation at) 8.5% is still very high, but there is optimism that perhaps June was the peak,” said Randy Frederick, Charles Schwab’s vice president of trading and derivatives.

July producer price data on Thursday, as well as August inflation and employment data due out next month, could change the Fed’s course again, Frederick said.

The Fed has raised interest rates by 225 basis points since March amid fears that soaring borrowing costs could plunge the US economy into recession.

Traders work on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. August 8, 2022. REUTERS/Andrew Kelly

The slowing in inflation is the first “positive” reading for price pressures since the Fed began tightening monetary policy, Chicago Fed President Charles Evans said, although signaling that he thinks the Fed still has work to do have to do. Continue reading

After a bumpy start to the year, the benchmark S&P 500 is up nearly 15% from mid-June lows, largely on expectations that the Fed will become less restrictive in its efforts to soft-land the economy, which is struggling against containment than expected will be inflation.

But the S&P 500 is down 12% from its all-time high in January and has been bearish ever since.

The CBOE Volatility Index (.VIX)Wall Street’s fear gauge, fell below the 20.00 level to close at more than a four-month low.

High-growth and megacap technology stocks, whose valuations are vulnerable to rising bond yields, rose as government bond yields across the board fell sharply. apple inc (AAPL.O)alphabet inc (GOOGL.O)Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O) all up more than 2% each.

Economically sensitive banks (.SPXBK) rose 2.7%, with Goldman Sachs Group Inc (GS.N) and MorganStanley (MS.N) increases of about 3% each.

“Banks have underperformed and are now getting an offer,” said Thomas Hayes, managing director of Great Hill Capital LLC, adding that investors are chasing the laggards who have not participated in the rally since the June lows.

Tesla Inc (TSLA.O) rose 3.9% after Elon Musk sold $6.9 billion of shares in the electric vehicle maker to fund a potential deal for Twitter Inc (TWTR.N) if he loses a legal battle with the social media platform. Twitter gained 3.7%. Continue reading

Metaplatforms Inc (META.O) rose 5.8% after Facebook’s parent company said on Tuesday it had raised $10 billion in its first-ever bond offering. Continue reading

Volume on US exchanges was 11.33 billion shares, compared to the average of 10.98 billion for the entire session over the past 20 trading days.

Rising issues predominated on the NYSE at a 5.69 to 1 ratio; on the Nasdaq, and the 3.34 to 1 ratio favored movers.

The S&P 500 posted five new 52-week highs and 29 new lows; the Nasdaq Composite posted 64 new highs and 54 new lows.

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Reporting by Herbert Lash; Additional reporting from Bansari Mayur Kamdar, Aniruddha Ghosh, Sruthi Shankar, Medha Singh and Karina D’Souza in Bengaluru; Edited by Anil D’Silva, Shounak Dasgupta and Lisa Shumaker

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