Stocks jumped Tuesday after a lighter-than-expected consumer prices report for November raised expectations that inflation is peaking.
The Dow Jones Industrial Average gained 246 points, or 0.72%. The S&P 500 added 1.44%, while the Nasdaq Composite rose 2.1%.
Major indexes were off their best levels of the day as trading continued Tuesday. The Dow jumped 500 points in the prior session as investors bet on a bullish CPI report.
The consumer price index rose just 0.1% from the previous month, and increased 7.1% from a year ago, the Labor Department reported Tuesday. Economists surveyed by Dow Jones had been expecting a 0.3% monthly increase and a 7.3% 12-month increase. Excluding volatile food and energy prices, so-called core CPI rose 0.2% on the month and 6% on an annual basis, compared to respective estimates of 0.3% and 6.1%.
“That was a big surprise and markets are reacting accordingly,” said Steve Sosnick, chief strategist at Interactive Brokers. “Today is a day where the entire bullish scenario is working. Yields are lower on the inflationary story. Stocks love the story of a less restrictive Fed and the dollar is weaker which also helps stocks.”
Tuesday’s inflation report could play a key role in the Federal Reserve’s next rate-hiking decision expected at the conclusion of its two-day policy meeting on Wednesday. Traders are largely pricing in a 50-basis point increase, a slight decline from the previous four hikes. (1 basis point equals 0.01%.)
That expectation is…
