The stock rally took a breather after the biggest one-day surge since 2020

US stocks extended a dramatic rise on Friday after deceleration in CPI inflation data sounds the most intense rally on Wall Street since the beginning of 2020.

S&P 500 (^ GSPC) rose 1%, while the tech-heavy Nasdaq Composite (^ IXIC) get 2%. The Dow Jones Industrial Average (^ DJI) turned the post positive to close after lagging behind other indexes for a lot of time. Treasury yields held steady after Thursday’s biggest one-day decline in more than a decade.

A reverse China’s Zero-COVID policy to reduce the amount of time in quarantine travelers to the country to spend sentiment buoyed in early trade. Oil markets advanced as traders speculated that the move could provide a boost to demand for the commodity, with West Texas Intermediate (WTI) futures bouncing nearly 3% to above $88 a barrel.

While on the front of economic data, the University of Michigan’s initial reading on its consumer sentiment survey for Nov fell to 54.7 from. 59.9 in October, the lowest since July.

Three main averages skyrocketed Thursday, each recording their biggest one-day gains since rebounding from the COVID crash more than two years ago. outsized movements are catalyzed by lighter October consumer price data which fueled the Federal Reserve bet can halt tightening the financial situation as early as next year. The S&P 500, Dow, and Nasdaq rose 5.5%, 3.7% — or 1,200 points — and 7.4%, respectively.

“Overall, the report shows that the peak of inflation may finally be behind us, although inflation may remain elevated for a while,” said BNY Mellon Investment Management Head of US Macro Sonia Meskin in a note Thursday.

He said the figure supported a smaller 0.50% rate hike for December telegraphed at this month’s FOMC meeting, which investors priced in.

“However, it is also important not to over-emphasize a report for inflation and policy trajectory,” he added.

The Consumer Price Index (CPI) in October rose by 7.7% annually and increased by 0.4% during the month. ignoble basic “core”.That strips out the volatile food and energy components of the report, prices rose at a clip of 6.3% year-over-year and 0.3% on a monthly basis.

Federal Reserve Board Chairman Jerome Powell speaks at a news conference after a meeting of the Federal Open Market Committee, at the Federal Reserve Board Building in Washington, DC, on November 2, 2022. - The Federal Reserve delivered a steep increase in interest rates on Wednesday, as expected, with a move - and to cool down the red-hot inflation taking on more weight Amid the political maelstrom ahead of the key US midterm elections.  The latest three-quarter percentage point increase took the benchmark lending rate to 3.75-4.0 percent, the highest since January 2008. (Photo by Mandel NGAN/AFP) (Photo by MANDEL NGAN/AFP via Getty Images)

Federal Reserve Board Chairman Jerome Powell speaks at a news conference after the Federal Open Market Committee meeting on November 2, 2022. (Photo by MANDEL NGAN/AFP via Getty Images)

Despite the moderation, many strategists insist that the excitement is premature, along with Federal Reserve officials still poised to tighten further after Chair Jerome Powell said last month that policymakers still have “several ways to go“in restoring price stability – a message that his central bank colleagues have since also echoed in a series of public speeches.

“The extreme data dependence of the Fed combined with the fact that economic data only shows the labor market in real-time and the slowdown of inflation with a lag, increases the possibility of a severe crash,” Gregory Daco, chief economist of EY Parthenon, said in an emailed comment. .

Meanwhile, Nicholas Colas of DataTrek pointed out another fact: Although the trend of lower inflation once it peaked and began to decline – as seen in 1970, 1974, 1980, 1990, 2001, and 2008 – the downshift that usually comes with recessions, and there is none. exception to the rule.

turmoil stay in the cryptoworld behavior FTX debacle unravels and the company announced Friday morning that it filing for bankruptcy. Fallen crypto hero billionaire Sam Bankman-Fried has also stepped down as CEO and reportedly under investigation by the US Securities and Exchange Commission as the exchange seeks a cash bailout. Bitcoin traded around $16,500 Friday morning.

Alexandra Semenova is a reporter for Yahoo Finance. Follow him on Twitter @alexandraandnyc

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