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Stock Market Today: Encouraging Inflation Data Triggers Staggering Stock Market Rally

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The latest inflation data catapulted stocks higher on Wednesday, with major equity indices rallying sharply at the close.

Ahead of the opening bell this morning, the Labor Department said its consumer price index (CPI) rose 8.5% year-over-year in July, down from the June reading of 9.1%. The core CPI, which excludes food and energy prices, rose 5.9% from a year earlier. On a month-to-month basis, the CPI was flat, while the core consumer price index rose 0.3%.

Both the headline and core inflation reading were lower than economists expected, prompting much commentary from the best minds on Wall Street about how this inflation reading will affect future policy decisions from the Federal Reserve.

“As of today, the headline CPI was expected to show some deceleration, mainly due to falling gasoline prices, but there were concerns that core inflation would continue to be problematic,” he said. said Michael Reinking, senior market strategist at the New York Stock Exchange. “All in all, the report was a positive step. In August, energy prices continued to fall and there are signs that food prices may start to fall, fueling hopes that this could be the first in a series of best inflation readings.”

In the wake of today’s CPI data, market expectations for the Fed to issue a 50 basis point rate hike (one basis point equals one hundredth of a percentage point) have spiked to 62.5% down from yesterday’s reading of 32.0%, according to CME Group’s FedWatch tool. Projections of a 75 basis point hike have dropped.

“The market reacted favorably with the idea that inflation has probably peaked and the Fed may be able to moderate its pace of rate hikes,” said Stephanie Lang, chief investment officer at the consultancy. in investment Homrich Berg. “The market quickly priced in a 50 basis point hike by the Fed in September, which is more likely than the 75 basis points previously expected by the market.” However, as Reinking reminds us, “a lot can change between now and then, as there is yet another round of employment and inflation data before this meeting.”

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“While we are encouraged by the report, we believe the Fed’s job is far from done,” Lang added. “We believe they will continue their path of raising interest rates to a tight stance as inflation remains far from their 2% target.”

Still, expectations of lower rate hikes and signs of slowing inflation led to a broad-based rally on Wall Street, with the materials (+2.9%) and consumer discretionary (+2.9%) outperforming sectors. With regard to the main indices, the NasdaqCompositetopped its peers with a 2.9% gain to 12,854, although the S&P 500 Index (+2.1% to 4,210) and the Dow Jones Industrial Average(+1.6% to 33,309) ended solidly higher.

stock price chart 081022

Other news on the stock market today:

  • Small cap Russell 2000jumped 3.0% to 1,969.
  • U.S. Crude Futuresrose 1.6% to settle at $91.93 a barrel.
  • Gold Futures Contractsedged up 0.1% to end at $1,813.70 an ounce.
  • Bitcoin gained 2.6% to $23,670.03. (Bitcoin trades 24 hours a day; prices shown here are as of 4 p.m.)
  • Coinbase Global(COIN) jumped 7.4% after the cryptocurrency platform reported earnings. In the second quarter, COIN posted a bigger-than-expected net loss of $4.98 per share, while revenue of $803 million also missed the target. The company said the number of users transacting monthly fell to 9 million from 9.2 million in the March quarter. “COIN had no counterparty exposure to crypto insolvencies in Q2 (Celsius, Three Arrows Capital, LUNA/TERRA),” says BofASecurities analyst Jason Kupferberg (Buy). “COIN also has a history of no credit loss from funding activities, holds client assets 1:1, and all client crypto lending activity is at client discretion, with 100%+ collateral required. We believe that these strict risk management practices will be a long-term positive differentiator for COIN.”
  • waltz disney(DIS) added 4.0% ahead of tonight’s fiscal third quarter earnings report. “With the stumble of Netflix, Disney+ is now the standard bearer of streaming and therefore an indicator of the health of subscription streaming services and even broader consumer demand,” said Domenic Venuto, Director operating investment bank Progress Partners. “On its revenue, all eyes will be on net subscriber additions with expectations set in the 10 million range if it strives to meet Bob Chapek’s forecast of 230 million to 260 million subscribers from ‘by 2024.” DIS certainly delivered on its promises, claiming to have added 14.4 million Disney+ subscribers in the three-month period. The company also beat the high and low numbers and said it was raising prices for the streaming service in the United States. DIS stock is up 5.8% after the bell.

Metaverse stocks are poised for major growth

The Nasdaq’s outperformance today highlights a trend we’ve seen recently in the stock market: new life for hard-hit growth stocks. Over the past month, the iShares Russell 1000 Growth ETF (IWF) has risen 10.0% against a smaller gain of 6.7% for the iShares Russell 1000 Value (IWD) ETF.

Even so, many on Wall Street, including Robert Schein, chief investment officer of financial services firm Blanke Schein Wealth Management, still favor value stocks over growth, given an uncertain macro environment. But “we think growth will return to leadership some time after the Federal Reserve slows its tightening efforts,” Schein said.

Investors with a longer-term view may want to start evaluating opportunities in disruptive technologies such as electric vehicles (EVs) and artificial intelligence (AI) that are expected to see strong growth in the future. There’s also the metaverse, whose addressable market is expected to reach $13 trillion by the end of this decade, according to some estimates. Here, we take a look at nine metaverse stocks and an exchange-traded fund that are poised to profit substantially from this growing technology.

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