The Consumer Price Index (CPI) for October reflected a 7.7% increase over last year and 0.4% increase over the prior month, better than Wall Street expected. Economists surveyed by Bloomberg called for a 7.9% annual rise and 0.5% monthly gain.
The S&P 500 (^GSPC) rallied 5.5% — its biggest intraday gain since April 2020 — while the Dow Jones Industrial Average (^DJI) jumped 1,200 points, or 3.7%, the most since May 2020. The technology-heavy Nasdaq Composite (^IXIC) advanced a whopping 7.4%, its sharpest climb since emerging from the pandemic crash in March 2020. Meanwhile, Treasury yields tumbled following the report, with the benchmark 10-year note falling well below the 4% level.
Moderations in the data again fueled bets that the Federal Reserve may ease the pace of its monetary tightening campaign, with investors shrugging off Chair Jerome Powell's assertion earlier this month that a policy shift is not imminent. Remarks by Federal Reserve Bank of Philadelphia President Patrick Harker also suggested Thursday that officials may be nearing a pause, though other officials stressed the need for continued hikes, even if at a slower pace.
Sharp gains were seen across technology stocks, with Apple (AAPL) and Microsoft Corporation (MSFT) each up more than 8%. Amazon (AMZN) shares surged 12%, Facebook parent Meta (META) 10% — placing the stock on track for its biggest weekly gain since July 2013 — and Nvidia (NVDA) 14%.
The stocks added roughly $400 billion in market capitalization combined on Thursday, according to Bloomberg data.
"The first downside surprise in inflation in several months will inevitably be received by an equity market ovation," Principal Asset Management Chief Global Strategist Seema Shah said in a note, adding however that Federal Reserve officials remain on pace to proceed with rate increases and a pause is still elusive.
"Let the market enjoy today, it still has another 100 basis points or so of tightening to commiserate," she said.
Elsewhere in economic data — in the shadow of CPI — filings for unemployment insurance rose last week but held near historic lows. Initial jobless claims, the most timely snapshot of the labor market, came in at 225,000, a 7,000 increase from the prior week, Labor Department data showed.
Thursday's market moves come after each of the major averages slid at least 2% in the previous session over midterm election uncertainty.
Republicans appeared poised to take control of the House but did not sweep polls at the extent anticipated, undermining optimism over the market-friendly gridlock investors anticipated.
Even as Wall Street awaits political clarity, with vote counting still underway, GLOBALT Investments vice president and senior portfolio manager Thomas Martin argued that markets are laser focused now on only one thing: the effect of central bank tightening on inflation.
“So far, the effects seem to be not all that appreciably different from zero,” he said in a note late Wednesday. “Yes, there have been data points hinting at the easing of some prices, but they haven’t been able to muster sustainable momentum.”
Until the latest policy-setting meeting earlier this month, traders hoped Federal Reserve officials would ease their monetary tightening plans as economic data softens. But Chair Jerome Powell pushed back against the notion that a shift in the Fed’s path is imminent, with inflation and payrolls still firmly elevated — the latter, still far below the Fed's goal of 2% despite October's decline.
Prior to Wednesday's rebound, renewed risk-off sentiment on Wednesday was also stoked by the fast collapse of FTX, the cryptocurrency exchange run by billionaire Sam Bankman-Fried. Concerns over the possibility of insolvency for FTX after rival Binance walked back on an emergency rescue deal to buy the firm wreaked havoc on crypto markets, with jitters pouring over into other risk assets. Bitcoin (BTC-USD) hovered around $16,300 Thursday morning.
In earnings news, shares of Nio (NIO) rallied 12% after the Chinese electric carmaker reported a jump in third-quarter revenue and forecasted strong production.
ZipRecruiter (ZIP) shares jumped 16% after the online employment marketplace raised its full-year outlook and greenlighted a $200 million increase to its share repurchase program.
Shares of Bumble (BMBL) rose 10% after reversing a pre-market decline of 15% despite unveiling third-quarter revenue that missed Wall Street estimates and downwardly revised guidance for the current period over currency headwinds and Russia’s war in Ukraine.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc