Dow jumps 489 points and bond yields plunge as CPI report suggests ‘inflation fever has broken’

• US stocks saw an impressive rally as the latest CPI data surprised investors with a slowdown in inflation.
• Markets are betting this will be enough to stop the Fed from raising interest rates in December.
• Bond yields fell dramatically, with the 10-year rate falling more than 19 basis points.

Thanks for registering!

Access your favorite topics in a personalized feed while you're on the go.

download the application

U.S. stocks soared on Tuesday as markets rallied around the October Consumer Price Index report, which surprised investors with weaker-than-expected inflation data.

The Dow Jones Industrial Average rose 489 points, while the S&P 500 and Nasdaq rose 1.9% and 2.4% respectively.

That's because last month's weak inflation bolsters hopes that the Federal Reserve can end its rate-hiking campaign and strengthens the chances that the U.S. economy can avoid a recession. Since the CPI report, market expectations for a rate hike in December fell from 14% to 0%, according to the CME FedWatch Tool.

"The inflation fever has disappeared in the United States," reacted Bill Adams, chief economist at Comerica Bank, adding: "The colder-than-expected October CPI report keeps the Federal Reserve on track to cut rates in 2024".

According to the October report, prices remained stable month-on-month, despite expectations of a 0.1% increase. The annual rate cooled to 3.2% from 3.7% in September, below forecasts of 3.3%.

Core inflation was also lower than expected, at 4%.

The news also sent Treasury yields tumbling, with the 10-year note falling nearly 20 basis points to 4.439%. Just last month, fears of rising interest rates helped push long-term U.S. debt yields to near multi-decade highs, surpassing the 5% threshold.

"The CPI data confirms what everyone already knew: inflation is declining significantly. The question now for the Federal Reserve is whether they continue to believe that it is necessary to slow the economy into recession to completely defeat inflation." Jamie Cox, Managing Partner at Harris Financial Group, said.

Here's where the US indices stood at the 4:00 pm closing bell on Tuesday:

This is what is happening today:

In commodities, bonds and cryptocurrencies:

• West Texas Intermediate Crude rose to $78.28 a barrel. raw brentThe international benchmark index remained almost stable at $82.50 per barrel.
• Gold rose 0.9% to $1,967.20 an ounce.
• The 10-year Treasury yield plunged 19.6 basis points to 4.436%.
• bitcoin fell 3.4% to $35,408.