Stock Market Today: Wall Street rally rumbles on as inflation slump sparks peak rate bets
Wall Street is looking to extend its strongest single-day rally in nearly seven months Wednesday as investors mark the end of the Fed's rate-hike cycle.
U.S. equity futures extended gains Wednesday, following on from the strongest rally on Wall Street in nearly seven months, as investors bet that slowing inflation pressures will mark the end of Federal Reserve rate hikes amid a so-called 'soft landing' for the world's largest economy.
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Updated 8:45 AM EST - Martin Baccardax
Consumers continued to spend in October, although overall retail sales slowed 0.1% to just under $705 billion, the Commerce Department reported Wednesday, thanks in part to a big decline in domestic gas prices.
Related: Retail sales slow, but top Wall Street forecasts, as inflation pressures ease
Factory gate inflation, meanwhile, slowed to an annual rate of 1.3% last month, well south of the Street's 1.9% forecast, validating the easing price pressures reported in the Commerce Department's October CPI report.
Updated 7:57 AM EST - Martin Baccardax
Traders are buzzing over a research note from Goldman Sachs' David Kostin, one of Wall Street's most-respected market strategists, which sees the S&P 500 rising past the 4,700 level by the end of next year, a near 6% gain from current levels.
Kostin cites 'soft landing' prospects, likely Fed rate cuts and improved corporate earnings as powering solid, but slowing, 2024 equity market gains.
Updated 7:02 AM EST - Martin Baccardax
Target TGT shares are surging after the retailer followed Home Depot HD with a stronger-than-expected third quarter earnings update, but echoed the home improvement group's hint that holiday sales may slow amid a pullback in higher-item spending. Walmart WMT reports tomorrow.
Target was last marked 15.15% higher in pre-market trading to indicate an opening bell price of $127.40 each.
Related: Target earnings blast forecasts, but same-store sales slide, theft increases
Updated 6:08 AM EST - Martin Baccardax
Stock futures are adding to early pre-market gains, with a softer-than-expected reading for October inflation in the U.K., as well as a big decline in wholesale prices out of Germany, added to the market's 'peak rate' zeitgeist. Scott Olson/Getty Images
The Commerce's Department's October inflation report showed headline prices rose just 3.3% from last year, down from the 3.7% pace in September, while core pressures eased to a fresh two-year low of 4%, surprising investors and launching a sharp rally for U.S. stocks.
Benchmark 10-year note yield tumbled nearly 20 basis points, and were last marked at mid-September lows of 4.512% in early New York trading, as investors pared bets on another Fed rate hike. At the same time, wagers on a spring rate cut began to emerge, pulling 2-year note yields down nearly 20 basis points to around 4.842%, and were marked at 4.855% in overnight trading.
The U.S. dollar index, meanwhile, fell the most in more than a year against a basket of its global peers but edged 0.17% higher in early New York trading to 104.225.
Related: Inflation slows sharply, core at 2-year low; Fed rate cut seen more likely
The S&P 500 surged nearly 2%, notching its best single-day advance since April, while the small-cap Russel 2000 soared 5.44% for its best day since November of last year.
A tamer inflation backdrop, set against an economy that is growing at a 2.1% clip, based on the Atlanta Fed's GDPNow forecasting tool, rising corporate earnings and a resilient job market could all combine to deliver the 'soft landing' policymaker's have been aiming for, where the economy avoids recession but also manages to deliver consumer price stability.
Retail sales data due at 8:30 am eastern time today will go a long way towards putting that puzzle together, as will the tail end of the third quarter earnings season and Thursday's weekly jobless claims figures.
Last night's vote on Capitol Hill, which saw the House comfortably pass a stop-gap bill that will avoid a government shutdown later this week and maintain funding at current levels until mid-January, also relieved some headline risk hanging over markets.
With all that ahead, and the House vote in the rear view mirror, Wall Street is looking at a modestly firmer open to tag on to last night's rally. Futures contracts tied to the S&P 500, which is now up 5.2% for the month, are priced for a 10 point opening bell gain while those linked to the Dow Jones Industrial Average are indicating a 55 point advance.
The tech-focus Nasdaq, which surged 2.37% yesterday to take its November advance to 9.7%, is set for a 75 point advance.
Global oil prices traded modestly lower ahead of Energy Department data on domestic stockpiles and crude exports, with WTI futures contracts for December delivery falling 42 cents to $77.84 per barrel in early New York dealing.
Wall Street's broad rally flowed into the Asia session as well, where stocks were also boosted by reports of more than $100 billion of stimulus from Beijing to support the beaten-down property sector, as well as better-than-expected October readings for retail sales and industrial production.
The region-wide MSCI ex-Japan index surged 2.6% into the close of trading, while the Nikkei 225 gained 2.52%.
In Europe, another sharp inflation pullback, this time in the United Kingdom, helped lift the FTSE 100 more than 1% higher in early London trading while the region-wide Stoxx 600 rose 0.47% in Frankfurt.
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