Wall Street toasts yet another litmus test of the slowdown in inflation growth in the United States. At around 3.40 pm Italian time, the Dow Jones advanced by around 390 points (+1.16%), to 33,926; the S&P 500 climbed 1.68% to 4,023, while the Nasdaq Composite jumped 2.30% to 11,454 points.
The producer price index, one of the most important parameters for monitoring the inflation trend, was announced before the start of the session.
The figure (PPI) rose 8% year-on-year, slower than the expected 8.3% increase and also compared to the +8.5% in September.
On a monthly basis, the PPI rose by 0.2%, less than the +0.4% expected by economists and at half the pace even compared to the previous +0.4%.
Excluding the more volatile components represented by the prices of food and energy, core inflation measured by the producer price index rose by 6.7% on an annual basis, a decidedly lower pace than the +7.2% expected.
On a monthly basis, the core inflation trend was unchanged, compared to the +0.3% estimated and slowing compared to the previous +0.2% (revised downwards from the +0.3% initially communicated).
The PPI index confirms what emerged from the other crucial figure which reflects the inflation trend: the CPI index, or consumer price index, which was released last Thursday, also relating to the month of October.
The CPI highlighted an inflation which rose on an annual basis, in October, by 7.7%, from the previous rise of 8.2% in September and compared to the +8% expected by the consensus.
The growth of core inflation also decreased which, on an annual basis, went from the rise to the maximum rate of the last 40 years equal to +6.6% in September, to +6.3% in October.
Investors immediately placed bets on the arrival of less aggressive restrictive measures by Jerome Powell’s Fed at its mid-December meeting, after four consecutive rate hikes of 75 basis points since the beginning of the year.
Last November 2, the Fed raised rates by 75 basis points, taking them from the range between 3% and 3.25% to the new range between 3.75% and 4%, a record value since 2008.
Such was the euphoria that, on the day of the data, the Dow Jones index soared by more than 1,200 points, the S&P 500 soared by 5.54% while the Nasdaq Composite jumped by more than 7%.
Today’s PPI reading further fuels hope that the Fed’s string of aggressive tightening is nearing its end.
However, it must be said that some Fed exponents are having a hard time claiming victory: on the other hand, the inflation target towards which the American central bank tends is decidedly lower, equal to 2%, compared to current levels, which are still hovering around a growth of 8%.
But the hope of less aggressive rate hikes is also confirmed by the downward trend in Treasury yields:
ten-year rates, which missed the 4% threshold last week after the publication of the CPI, today drop to 3.085%, while two-year rates slow down to 4.33%, reporting a drop of no less than 8 basis points.
Among the protagonists of today’s session, certainly Amazon.
According to reports from the New York Times and the Wall Street Journal, the US e-commerce giant would be ready to send about 10,000 employees home, with the official announcement expected as early as this week.
So not only Elon Musk’s new Twitter, which literally fired half the workforce of the newly acquired microblogging company overnight, and Mark Zuckerberg’s Meta, which announced the cut of 11,000 employees, equal to approximately 13 % of the workforce.
Even the US e-commerce giant is on the verge of sending 10,000 employees home, confirming the crisis in the hi-tech sector, which is facing the slowdown in the economy, rising interest rates and stubborn inflation which curbs the propensity to consume. The stock jumps more than 3%.
Among other stocks, Netflix did well, jumping by almost 4% after the positive note from Bank of America, which revised its rating upwards from “underperform” to “buy”.
Then there is the Warren Buffett effect on Taiwan Semiconductor’s ADRs, which reported an 11% rally in afterhours trading on Wall Street following the news of the acquisition of a stake by holding company Berkshire Hathaway for a value more than $4.1 billion.
Good news also from the retail front: Wal-Mart announced a quarterly better than expected, selling its outlook upwards. The American giant said that, during its third fiscal quarter, sales jumped by almost 9%, taking revenue to $152.81 billion, much better than the $147.75 billion expected by the consensus.
In the three months ended October 31, Wal-Mart also earned adjusted earnings per share of $1.50, better than an estimated $1.32. The title shoots up by 5.7%.
Home Depot also reported better-than-expected quarterly results.
Notably, despite inflation, Home Depot revenue rose nearly 6% to a better-than-expected $38.9 billion, while profits came in at $4.3 billion, or $4.24 per share, better than the $4.1 billion, or $3.92 per share, in the same quarter of 2021, and also better than the estimated $4.12 per share. Home Depot’s stock is up just under 1%.