U.S. Averages Surge 2% After Softer Inflation Report

Barry Adams
14 Nov, 2023
New York City

Stocks advanced after a weaker-than-expected inflation report bolstered investor enthusiasm.

The S&P500 index and the Nasdaq Composite index jumped more than 1% after consumer price inflation resumed its slide for the third month in a row and core inflation dropped to a two-year low.

The weaker-than-expected inflation sparked debate about whether policymakers should consider the possibility of lowering interest earlier than expected.

Treasury yields fell sharply after the release of the inflation report, and 10-year Treasury yields dropped below 4.5%, sharply lower than the 16-year high reached in October.

 

Core Inflation Dropped to Two-year Low

The consumer price index, the measure of consumer inflation, slowed to 3.2% in October, the U.S. Bureau of Labor Statistics reported Tuesday.

The annual rate of inflation in October fell from 3.7% in September and August, but the monthly inflation measure was unchanged from the previous month.

Inflation eased largely because of a sharp decline in energy prices of 4.5%, compared to a decline of 0.5% in September.

Core inflation, which strips off volatile food and energy prices, rose 4.0% from a year ago and edged up 0.2% from the previous month, indicating stubborn and well-anchored inflation in the broader economy.

 

U.S. indexes and Yields

The S&P 500 index jumped 1.8% to 4,492.19, and the Nasdaq Composite rose 2.0% to 14,072.22.

The yield on 2-year Treasury notes increased to 4.85%, 10-year Treasury notes inched higher to 4.46%, and 30-year Treasury bonds edged up to 4.63%.

Crude oil increased $1.19 to $79.19 a barrel, and natural gas prices fell 3 cents to $3.15 a thermal unit.

Gold increased $13.46 to $1,959.14 an ounce after bond yields traded in a narrow range.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.65.

 

U.S. Stock Movers

Home Depot Inc. advanced 3.5% to $299.23 after the specialty retailer reported quarterly results and issued a muted outlook.

Revenue in the third quarter declined 3% to $37.7 billion from $38.9 billion, net income dropped 12.2% to $3.8 billion from $4.2 billion, and diluted earnings per share dropped to $3.81 from $4.24 a year ago.

Comparable store sales in the quarter decreased by 3.1%, and comparable sales at U.S. locations declined by 3.5%.

The company estimated sales and comparable sales to decline between 3% and 4%, operating rate margins between 14.2% and 14.1%, and diluted earnings per share to fall between 9% and 11%.