Bloomberg: US stocks rose as fresh data added to evidence inflation may have peaked, strengthening the case for the Federal Reserve to moderate its pace of interest-rate hikes. Treasuries also ended Tuesday higher while the dollar fell.
The S&P 500 climbed 0.9% and the tech-heavy Nasdaq 100 closed at its highest level since Sept. 19. While equities soared for most of Tuesday’s session, it gave back some of its gains after an Associated Press report citing an unidentified US intelligence official said that Russian missiles landed in NATO-member Poland.
Commodities from oil to corn also jumped on geopolitical worries from Europe. While Poland later said an explosion near its eastern border with Ukraine killed two people, it didn’t confirm the Associated Press report.
Also Read: Michael Burry of ‘Big Short’ fame buys these stocks after ‘almost’ emptying his portfolio in June
Markets have turned risk-on in recent days, trading off a softer-than-expected US consumer price index reading that many reckon will allow the Fed to raise rates in half-point increments. While a slew of Fed speakers in recent days indicated that officials could slow their tempo, they also emphasized the central bank has more work to do to tame inflation.
On Tuesday, the producer price index for October came in at 8% year-on-year, undershooting the 8.3% estimate and further easing inflation concerns.
Still, some investors are not convinced the recent data will do much to move the Fed.
Also Read: Global markets take cues from what the US Federal Reserve does
“Markets appear to be pricing in a best case scenario of a soft landing and falling inflation triggering a Fed pause,” Venu Krishna, head of US equity strategy at Barclays Plc. “In our view, this is not a given and remains a low probability scenario – these are just a few data points on inflation and it needs to be sustained. Even if the Fed eventually pauses, it might not be able to prevent a shallow recession.”