Stocks Rebound On Peak Inflation Hopes

Barry Adams
13 Oct, 2022
New York City

Stocks opened sharply lower and bond yields soared after the release of September's consumer inflation data.  

Major averaged dropped as much as 3% in the first thirty minutes of trading but managed to recover losses and trade in positive territory. 

Benchmark indexes rebounded after energy complex stocks advanced and tech stocks reversed earlier losses. 

Consumer prices rose at a faster pace in September, reflecting quickly entrenching inflation expectations deep in the services driven economy. 

The Consumer Price Index increased 0.4% in September on a seasonally adjusted basis, after rising 0.1% in August, the Bureau of Labor Statistics reported today. 

Prices rose 8.2% from a year ago on a seasonally unadjusted basis, the lowest increase in seven months, compared to 8.3% in August.  

Core index, excluding food and energy, rose 0.6% in September, matching the monthly rise in the previous month. 

On an annual basis, core rate increased 6.6% from a year ago, a new four-decade high highlighting elevated inflation pressures.   

The elevated inflation provides another signal for the Fed to continue its campaign of large-sized rate increase. 

The Federal Reserve is expected to lift interest rates by 75 basis points at its next policy meeting ending on November 2. 

There is no progress on inflation despite the Federal Reserve lifting rates five times in the last seven months.   

The yield on 2-year Treasury notes inched higher to 4.44%,  10-year Treasury notes increased to 3.97% and 30-year Treasury bonds edged up to 3.93%. 

The S&P 500 increased 1.4% to 3,631.96 and the Nasdaq Composite index added 1.1% to 10,559.84. 

Crude oil rose 97 cents to $88.96 a barrel and natural gas increased 16 cents to $6.60 a thermal unit.  

 

UK Gilt and Pound Turmoil Continues 

European markets traded higher in the early trading and briefly plunged more than 1.5% after the release of the U.S. consumer inflation data. 

Geopolitical tensions stayed high after Russia enlarged its bombing campaign in Ukraine. 

The market decline was sharp and brief after energy and resource stocks led the rebound in the region following the rise in New York. 

The UK bond market turmoil continued after reports suggested that the government is likely to reverse most of the tax proposals. 

The tax reversal supported a rally in the UK gilt market and also lifted the British pound for the second day in a row. 

The DAX index increased 1.4% to 12,339.21, the CAC-40 index added 0.6% to 5,850.72 and the FTSE 100 index advanced 0.4% to 6,850.27. 

 The Swiss benchmark SMI fell 8.51 to 10,199.32 after trading in tight range. 

The euro edged up 0.8% to 97.78 U.S. cents and the pound jumped 2.2% to $1.135. 

Oxford Instruments Plc gained 7.7% to 1,854.0 pence after the high-tech company sounded optimistic about first-half results. 

 

Asian Markets Retreat 

Asian markets retreated ahead of the release of the U.S. consumer price inflation data that may impact rate-path in several countries in the region. 

The Nikkei 225 average declined 0.6% or 159.41 to  26,237.42, the Hang Seng index dropped 1.87% or 311.92 to 16,389.11 and the Sensex index fell 0.7% or 390.58 to 57,235.33. 

The Japanese yen traded near a 24-year low of 146.99 and Japanese wholesale prices rose the most in five months in September, the Bank of Japan reported today. 

The producer price index increased 0.7% from August and jumped 9.7% from a year ago, the preliminary data showed.