US Stocks Jump 3% as ‘Peak-Inflation’ Talk Triggers Risk-On Rally Across Markets

NEW YORK (Sputnik) - US stocks staged a powerful rebound after weeks of lethargic trading as speculation that inflation may be near to peaking in the United States drew investors away from the safe-haven of the dollar into equities and various other risk assets.

The Dow Jones Industrial Average, Wall Street’s broadest equities indicator comprising stocks of 30 large US corporations, closed up 828 points on Thursday, or 2.8% at 30,039 points, after languishing for weeks with typically daily moves of half a percent or less.

The S&P 500 Index, which represents the top 500 US stocks, finished the day up 92 points, or 2.6%, at 3,670.

The Nasdaq Composite Index, which comprises marquee names in technology such as Amazon, Apple, Facebook, Netflix and Google, settled up 232 points, or 2.2%, at 10,649.

The Federal Reserve has struggled for more than a year now to contain inflation in the United States.

The latest reading for US consumer prices on Thursday showed a 0.4% growth in September, double economists’ estimates and four times higher than the expansion in August. The annual growth of 8.2% was also not too far from the annual 9.1% expansion seen during the year to June, which marked a four-decade high.

These suggested the Fed was still far behind in its fight against inflation, the central bank has raised interest rates by 300 basis points since March to curb runaway price pressures and is likely to add another 125 basis points before the year-end. Economists expect further hikes in 2023, making any talk of "peak-inflation" irrelevant for now.

Despite that, stocks and other risk assets jumped Thursday on speculation consumer prices might not have too much further to climb.

"Policymakers have made clear that it will take more than just one number to sway them but investors have never been ones to wait that long," said Craig Erlam, analyst at online trading platform OANDA.

Economists have warned that the Fed could push the United States into a deep recession with the sharpest rate hikes in four decades, pointing to the high-flying housing sector and one-time ebullient stock market as the central bank’s potential victims.

Wall Street’s three major indexes remained close to or within bear-market territory despite Thursday’s rebound, with the Dow down 17% on the year, the S&P lower by 23% and the Nasdaq off by 31%.

US mortgage rates, meanwhile, climbed to 6.7% two weeks ago, their highest levels in 15 years as Fed rate hikes borrowing costs for home loans to swell.