EconomyPrice AnalysisStocks

US Stock Futures Surge As Decreasing Inflation Energizes Bulls

On Wednesday, the Dow Jones Industrial Average DJIA, +0.18%, increased 55 points, equivalent to 0.18%, to a value of 33563. The S&P 500 SPX, +0.86%, increased 35 points, equivalent to 0.86%, to a value of 3962. The Nasdaq Composite COMP, +1.46%, gained 152 points, equivalent to 1.46%, to 11357.

What’s Driving Markets?

The rise spurred by predictions of cooling U.S. inflation trudged on, which helped push equity index futures upward. However, gains were tempered when the retailer Target, +3.96%, presented a poorly received earnings release, which caused its shares to plunge well over 10% in premarket activity.

The concerns that a conflict between Moscow and NATO may be sparked by a missile that struck Poland on Tuesday are being downplayed as several pieces of evidence indicate that these fears are unfounded. Instead, the United States government in Washington speculates that the shot could have been an unsuccessful effort by the Ukrainian military to neutralize oncoming Russian artillery.

Stocks have gained ground in six of the past eight days of trading after a report on October consumer prices. It was weaker than expected, and data on factory gate prices raised aspirations that inflation has hit its peak. 

Hopefully, the Fed Reserve will be less hostile to increasing interest rates. The report on October consumer prices was released last week.

Federal Reserve Raises Interest Rates

A drop in bond market uncertainty has had a more significant effect on the performance of stock indexes than a rise in the VIX. It is demonstrated by the MOVE indicator and given the macro superiority and the retracement in actual rates. 

Even though the Federal Reserve has raised interest rates by 375 percentage points in just eight months. The S&P 500 has increased by 11.6% since it reached its 2022 closing low on October 12. However, it is still down 15.3% for the year so far.

Meanwhile, data from the United Kingdom served as a timely warning that inflationary pressures may be harmful. For the year leading up to October, the CPI index grew at the quickest pace in 41 years, at 10.1%.

The semiconductor industry has been helping to take the lead in the most recent recovery of the stock market. Midway through October, the PHLX Semiconductor index (SOX) reached a level that had not been seen in the previous two years. Investors were concerned about high valuations amid fears that a slowdown in the global economy would affect consumer demand for electronics.

However, since then, the SOX has increased by 30% as investors like Warren Buffett. Who just bought a stake in Taiwan Semiconductor Manufacturing for $4 billion, saw potential in the industry. 

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