Dow futures surge more than 800 points after October inflation report misses expectations

Markets to open positively ahead of key inflation report

Stock futures surged on Thursday after consumer price data for October sparked hopes that inflation had peaked.

Futures related to the Dow Jones Industrial Average rose 844 points, or 2.6%. S&P 500 futures rose 3%, while Nasdaq 100 futures rose more than 3.7%.

The consumer price index, a broad measure of the cost of goods and services, rose just 0.4% this month and 7.7% from a year earlier. It was the lowest annual increase since January. Economists expected growth of 0.6% and 7.9%, according to Dow Jones data. Excluding volatile food and energy costs, the so-called core CPI rose 0.3% for the month and 6.3% from a year earlier, also missing expectations.

“If you get any kind of help here, it definitely shows how much the market is concerned, worried and wants to run the CPI,” said NatWest’s John Briggs. “It just brings up the idea that inflation is peaking, the Fed is peaking. … the Fed will slow and peak, rather than continuing to hike rates by 75 basis points at a time.”

U.S. Treasury yields plummeted after the CPI report, with the 10-year Treasury yield falling more than 18 basis points to 3.946%, below the key 4% level. The two-year U.S. Treasury yield fell more than 23 basis points to 4.395%.

The day’s losses came as the Dow fell 646.89 points or 1.95%. The Nasdaq Composite and S&P 500 fell nearly 2.5% and about 2.1%, respectively.

The drop was due to uncertain votes in the U.S. midterm elections. Markets had expected Republicans to take full control of the House and Senate on Tuesday — a situation that would create a gridlock in Washington, D.C. Conversely, key Senate races in Arizona, Georgia and Nevada remain tightly contested. In fact, the Senate race between Democratic incumbents Raphael Warnock and Herschel Walker is headed for a runoff in December.

The pain in the stock market worsened late Wednesday after cryptocurrency exchange Binance said it would withdraw from plans to acquire its rival FTX. This dragged down the tech sector and pulled the price of Bitcoin to its lowest point in 2020.

Chris Zaccarelli, chief investment officer at the Alliance of Independent Advisors, said the lack of clarity on the election and uncertainty over the upcoming October consumer price index data and corporate earnings reports were drivers of the sell-off.

“These three things lead to uncertainty,” he said. “And, as we all know, markets really don’t like uncertainty.”

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