Dow rises 900 points in choppy trading

US stocks turned sharply higher on Thursday, in a strong reversal after major indexes spent most of the morning deep in negative territory.

Stocks fell in early trading after new data showed inflation remains persistently high, bolstering expectations of continued large interest rate increases from the Federal Reserve. At its lowest levels, the Nasdaq Composite Index is down more than 3%, the S&P 500 is down more than 2%, and the Dow Jones Industrial is down nearly 2%, according to Dow Jones market data.

The morning declines came on the heels of what was a dismal stretch for equities. The S&P 500 fell on Wednesday for the sixth day in a row, hitting its lowest closing level since November 2020.

It appears that traders have decided that the sell-off has gone too far. Stocks pared their losses all morning, then turned green shortly after 11 a.m. The S&P 500 recently gained 2.8% while the Dow Jones Industrial Average rose about 3%, or about 900 points. The Nasdaq Composite Index is up 2.3%.

“What the market is seeing are the effects of a lot of traders in the short term,” said Tom Galvin, chief investment officer at wealth management firm City National Rochdale. While some traders dumped stocks after the inflation data, “Once the sell-off is over, I think the markets are starting to stabilize.”

The upward turn came as a relief after another punishing period in the markets.

The Nasdaq Composite, like the S&P 500, closed lower on Wednesday for the sixth consecutive day of trading. On Tuesday, those losses sent a measure of high-tech stocks into a bear market — Wall Street parlance refers to a drop of 20% or more from its recent peak — for the second time this year.

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However, such heart-stopping movements — sharp gains as well as sharp dips — can be a sign of a problem. shook the markets by a similar rotation Where they stumbled early in the epidemic.

Investors were focused on any signals about the trajectory of inflation and the trajectory of the Fed’s campaign to tame price hikes by raising interest rates. Higher interest rates have put pressure on the valuations investors are willing to pay for stocks, while raising concerns about future corporate earnings.

Earlier Thursday, new data from the Labor Department showed that a reading of US consumer inflation excluding volatile energy and food prices accelerated. To a new high in four decades. The so-called core measure of the consumer price index rose 6.6% in September from the previous year, the largest increase since August 1982.

Meanwhile, the overall CPI rose 8.2% in September from the same month last year, down from 8.3% in August and 9.1% in June.

This downward move may be good news for investors looking to justify repurchases in a stock market that is trading much cheaper than in the recent past.

“The fact that you’re seeing some peak in inflation to where we probably don’t have to fight the Fed as much, people will feel comfortable buying at these levels,” said Dan Ginter, CEO and CIO. In Genter Capital Management.

Investors debated whether signs of nervousness creeping into some markets could cause the Fed to slow the pace of interest rate increases. The fluctuations in the UK government bond markets, in the wake of big government plans, debt-financed tax deductionstriggered margin calls for pension funds And the ripple to Junk Debt Markets in the United States.

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Mortgage rates hit a 20-year high Thursday, a development likely to add pressure to the cold housing market, potentially accelerating the industry’s cyclical jolt.

Federal Reserve officials Expressed concern At their meeting last month about persistently high inflation. They revised their forecasts to raise interest rates, although some indicated caution about exaggerating them amid the risks of economic and financial volatility. The International Monetary Fund has warned that moves by global central banks to raise interest rates quickly have fueled… Increased risk to the financial system.

A series of interest rate hikes has spread across the US economy, and more is expected on the way. WSJ details the numbers hitting Americans’ wallets this year and beyond. Photo: Elise Amendola/Associated Press

“Market volatility and financial stability is something we are watching closely,” said Carsten Brzeski.

ING Groep‘s

Global Head of Macro Research, adding that the rapid rise in interest rates “is clearly a potential risk”.

Additional data from the Labor Department showed that 228,000 Americans applied for unemployment benefits in the week ending October 8, up from 219,000 in the previous week.

In the bond markets, the yield on the US 10-year Treasury rose to 3.939% from 3.901% Wednesday, reversing previous losses before the inflation data. Yields and prices move inversely.

In energy markets, Brent crude, the international benchmark for oil prices, rose 2.3% to $94.57 a barrel.

Offshore, the Stoxx Europe 600 continental index was up 0.8%.

Traders worked on the floor of the New York Stock Exchange last week.


Brendan McDermid/Reuters

In Asia, the major indices closed with losses. Hong Kong’s Hang Seng fell 1.9%, and South Korea’s Kospi fell 1.8%. Japan’s Nikkei 225 and China’s Shanghai Composite fell 0.6% and 0.3%, respectively.

Write to Caitlin Ostroff at [email protected] and Karen Langley at [email protected]

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