NEW YORK, Nov 14 (Reuters) - The S&P 500 and Nasdaq on Tuesday posted their biggest daily percentage gains since April 27, as weaker-than-expected inflation data supported the view that the Federal Reserve may be done to raise interest rates.
The Russell 2000 Small Cap Index (.RUT) jumped 5.4%, outperforming the broader market, while the rate-sensitive S&P 500 real estate sector (.SPLRCR) gained 5.3% and public services (.SPLRCU) rose 3.9%. All three recorded their largest daily percentage increases since November 10, 2022.
Data U.S. consumer prices were unchanged in October as Americans paid less for gasoline and the annual rise in core inflation was the smallest in two years. In the 12 months through October, the CPI rose 3.2% - below economists' estimates - after rising 3.7% in September.
"The clear catalyst was the weaker-than-expected inflation report," said Craig Fehr, chief investment strategist at Edward Jones.
"Getting some softer inflation readings provided markets with some additional comfort that the Federal Reserve will not have to implement a significant amount of additional tightening policy to continue lowering consumer prices."
Since March 2022, the Federal Reserve has increased its policy rate by 525 basis points to combat high inflation.
The Dow Jones Industrial Average (.DJI) rose 489.83 points, or 1.43%, to 34,827.7; the S&P 500 (.SPX) gained 84.15 points, or 1.91%, to 4,495.7; and the Nasdaq Composite (.IXIC) added 326.64 points, or 2.37%, to 14,094.38.
Furthermore, the KBW regional banking index (.KRX) rose 7.5% in its largest daily percentage increase since January 2021.
Traders work at the New York Stock Exchange (NYSE) in New York City, U.S., October 27, 2023. REUTERS/Brendan McDermid/File Photo Acquire license rights
"It's tough with higher rates and commercial real estate on their balance sheets," said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
Expectations for a rate cut by the Federal Reserve next year also changed after the day's data. US interest rate futures on Tuesday priced in a 65% chance of a rate cut in May, compared with 34% late on Monday, according to CME's FedWatch tool.
Investors also focused on U.S. lawmakers' negotiations over a funding bill as they face a weekend deadline to fund the federal government.
Among the individual actions, Snap Inc. Share (SNAP.N) jumped 7.5% following news that Amazon.com (AMZN.O) will allow Snapchat users in the United States to purchase some products listed on the e-commerce company directly from the social media app.
House deposit (HD.N) gained 5.4% after the US home improvement chain beat quarterly profit estimates.
Volume on US exchanges was 12.62 billion shares, compared to the average of 11.09 billion for the entire session over the last 20 trading days.
The issues that rose exceeded those that fell on the New York Stock Exchange by a ratio of 9.80 to 1; On Nasdaq, a 3.59-to-1 ratio favored advancers.
The S&P 500 posted 45 new 52-week highs and no new lows; The Nasdaq Composite recorded 106 new highs and 139 new lows.
Reporting by Caroline Valetkevitch; additional reporting by Sruthi Shankar and Amruta Khandekar in Bengaluru; additional reporting by Ankika Biswas; Editing by Shinjini Ganguli and Richard Chang
Our standards: The Thomson Reuters Trust Principles.
