Inflation Concern Eases, Buying Focuses on Blue-Chip Stocks
All Three Major Stock Indexes Rise
All three major stock indices on the New York Stock Exchange closed higher. September's U.S. wholesale prices came in below expectations, easing inflation concerns, and strong earnings reports from bank stocks led to buying activity focused on blue-chip stocks.
A trader is looking at the market board at the New York Stock Exchange (NYSE) in the United States. [Image source=Yonhap News]
On the 11th (U.S. Eastern Time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 42,863.86, up 409.74 points (0.97%) from the previous session. The Standard & Poor's (S&P) 500 index rose 34.98 points (0.61%) to 5,815.03, and the Nasdaq Composite Index ended the day at 18,342.94, up 60.89 points (0.33%).
The U.S. Department of Labor announced that the Producer Price Index (PPI) for September was unchanged on a seasonally adjusted basis compared to the previous month. This figure fell short of the market expectation of a 0.1% increase. The September figure showed a slowdown in the rate of increase compared to the 0.2% rise in the previous month. Core PPI also rose 0.1% month-over-month, slowing from the 0.2% increase in the prior month. Although the Consumer Price Index (CPI) for September, released the day before, generally exceeded expectations and stoked inflation fears, the news that the leading indicator of wholesale prices is cooling revived investors' risk appetite.
David Russell, Global Market Strategist at TradeStation, said, "Overall, these figures indicate that inflation is easing and its influence is diminishing," adding, "The Federal Reserve (Fed) may cut the benchmark interest rate by 25 basis points at each of the next two meetings this year."
According to the University of Michigan, the preliminary Consumer Sentiment Index for October was 68.9, down 1.2 points from 70.1 in September. Strong earnings reports from banks also continued. On this day, JPMorgan Chase reported earnings per share (EPS) of $4.37 for the third quarter of the fiscal year, surpassing LSEG's estimate of $4.01. Revenue also increased by 6% compared to the same period last year. Notably, JPMorgan reported that net income fell 2% year-over-year to $12.9 billion, but net interest income rose 3% to $23.5 billion. JPMorgan also raised its revenue forecast for the year.
Wells Fargo also posted a quarterly EPS of $1.52, significantly exceeding market expectations of $1.28. Revenue was nearly in line with estimates. CNBC reported that Wall Street tends to view the banking sector as a gauge of economic health and sets expectations for upcoming earnings seasons accordingly. Following this news, JPMorgan shares jumped 4.44%, the highest gain among the 30 stocks comprising the Dow Jones Industrial Average. Bank of America rose 4.95%, Wells Fargo increased 5.61%, and Goldman Sachs also climbed more than 2%.
Tesla's stock price plunged nearly 9% as many investors expressed disappointment with the much-anticipated robo-taxi. In contrast, ride-sharing platforms Uber and Lyft surged around 10% as a reaction to the disappointment over Tesla's robo-taxi. Netflix also hit an all-time high of $736 during the session but fell 1% amid selling pressure.
BlackRock announced that its assets under management (AUM) reached $11.5 trillion (approximately 1,554.2 trillion KRW) as of the end of the third quarter. Lorie Logan, President of the Federal Reserve Bank of Dallas, reiterated the need for a gradual reduction in the benchmark interest rate. With the PPI showing a greater-than-expected slowdown, expectations for a rate cut in November have strengthened. According to the CME FedWatch Tool, the probability of the federal funds rate remaining unchanged in November fell to 10% near the close, down from about 15% the previous day. The probability of a 25 basis point cut rose to 90%. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) closed at 20.46, down 0.47 points (2.25%) from the previous session.
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