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S&P 500 Rides Tech Rally as Easing Inflation Pushes U.S. Yields Lower

Published 08/10/2022, 02:13 PM
Updated 08/10/2022, 02:19 PM
© Reuters

By Yasin Ebrahim

Investing.com -- The S&P 500 jumped Wednesday, led by tech on falling U.S. Treasury yields as data pointing to signs that inflation may be nearing a peak eased fears that the Federal Reserve will have to continue with aggressive rate hikes.

The S&P 500 rose 1.9%, the Dow Jones Industrial Average gained 1.5%, or 481 points, the Nasdaq was up 2.6%.

The U.S. consumer price index, a measure of inflation, was flat in June compared with expectations for a 0.2% rise. In the 12 months through July, headline inflation eased to 8.5% from 9.1% in June but was still the highest since 1981.

The data suggested that inflation has “passed its peak,” Commerzbank said, as the “collapse in the price of gasoline played a decisive role.”

U.S. Treasury yields slumped as investors bet on a less hawkish Fed, with the 2-year Treasury yield, which is sensitive to fed rate hikes, slipping more than 2%.

Tech stocks, which have had a rocky start to the week following pressure from falling chip stocks this week, were aided by falling Treasury yields, which make valuations on growth stocks like tech more attractive.

Google-parent Alphabet (NASDAQ:GOOGL), and Meta (NASDAQ:META), led the gains for big tech, while Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT) were up more than 2% each.

Twitter (NYSE:TWTR), meanwhile, gained more than 2% on bets that the social media giant may win its legal battle with Tesla (NASDAQ:TSLA) chief executive Elon Musk to force the billionaire to complete his $44 billion deal to buy the company.

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The Tesla CEO sold nearly $7 billion in Tesla shares over the past few days, to “avoid an emergency sale of Tesla stock” should Twitter force the deal to close, Musk said.

“[T]he chances of a Twitter deal now more likely,” Wedbush analyst Daniel Ives said, and raised the price target on Twitter to $50 from $30. reflecting the “higher chances the deal now ultimately closes.”

Financials, mostly banks, were also in ascendency as the Treasury yield curve steepened, though remained inverted pointing to ongoing fears of a recession, albeit a milder downturn somewhat, following the latest inflation data and strong jobs report last week.

The 2-year Treasury yield over 10-year yield steepened to 40 basis points following a dip to lower than negative 50 basis intraday.

Signature Bank (NASDAQ:SBNY), Synchrony Financial (NYSE:SYF), and SVB Financial Group (NASDAQ:SIVB) were among the biggest gainers, with the latter up more than 9%.

Energy stocks lagged the broader market move higher as oil prices pared some early-day gains after data showing U.S. weekly inventories jumped by a more-than-expected 5.5 million barrels last week.

In earnings news, Coinbase Global (NASDAQ:COIN) climbed 7% as the crypto exchange operator's wider-than-expected loss was overshadowed by a jump in bitcoin.

Latest comments

I believe the suffering of stock markets is hardly over yet.
fabrication. Inflation is still rising. If it was falling it would be easing.
Inflation will ****the US economy. Todays value is a little bit lower due to a lower oil price. Wait for the winter time and you all see what will happen... Huge crash is coming...maybe as soon as in the authumn...
Collapse of gasoline prices?   when did that happen?   They're still up $2 from 2020.  you mean the 0.50 lower price?
Market manipulation at its finest
The CPI report was just another guise under which Wall Street could criminally manufacture a "rally" to get the laughingstock of the investing world "out of bear market territory."  What an absolute joke.  Even if this fraudulent market dropped 50%, it would be grossly overvauled.
so 8.5% inflation with lower gasoline prices is good?
apparently to young day traders it is. Post
Stop fooling retailers. The FED was very clear about fighting inflation and is not there yet. People will loose money when this all comes crashing into reality.
exactly, the way the article is written it is irresponsible.   If Fed and media communications were better then people won't lose their shirts in October when Q3 results are just horrible.  Inflation is 8.5%, fed is still hiking rates 75bps in September.  wage inflation is 5%.  no where near done.
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