After a hot inflation report, the Dow Jones surges 1,300 points from bear market lows; what’s next?
The Dow Jones futures held modest gains overnight, as did the S&P 500 and Nasdaq futures. In an earnings report released Friday morning, UnitedHealth and JPMorgan Chase are among the Dow giants to report. The stock market plunged after the CPI inflation report on Thursday morning but rebounded. The Dow Jones index surged more than 1,300 points from its intraday lows in the bear market. As the 10-year Treasury yield soared above 4% to a 13-year high, gains were slashed.
Futures prices of Dow Jones stocks today
There was a 0.5% increase in the projected worth of Dow Jones futures compared to its actual value. It was a profitable day for S&P 500 futures as they rose by 0.5%, and Nasdaq 100 futures also gained 0.5%.
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The 10-year Treasury rates decreased by two basis points, which resulted in a 3.93% yield. Governor Yi Gang of the People’s Bank of China stated that the central bank would focus on infrastructure growth in order to increase economic assistance. It is essential to keep in mind that overnight Dow futures trading might not directly convert into regular stock market trading the day after.
Thursday was a day of trading on the stock market.
Before the start of trading, the CPI inflation report was much hotter than anticipated. With little indication of underlying pressures letting up, the core inflation rate reached a four-decade peak in September. This caused futures to plummet, despite being previously higher. All the major indices hit their bear lows, and the stock market opened sharply lower, but soon bounced back strongly.
The Dow Jones Industrial Average went up 2.8%, and increased by 1,378 points from its intraday low of 828 points. The 10-year Treasury yield rose by 5 basis points to 3.95%, after earlier skyrocketing to a 13-year high of 4.06%. The two-year yield jumped 19 basis points to 4.48%, a figure which is closely connected to Fed policy as opposed to the economy. The US dollar initially rose when Treasury yields surged, but then reversed direction. Markets are expecting a fourth consecutive Fed rate hike of 75 basis points in November, and a fifth increase is predicted to come in December. There is a growing fear of a recession or global financial crisis.
What are the factors that are causing the Dow Jones stocks to increase in value today?
The Dow Jones Industrial Average saw a 2.8% rise, the S&P 500 rose 2.6%, and the Russell 2000 index of small-cap companies experienced a 2.4% increase. Core inflation, which excludes food and energy items, went up by 0.6% in August and was 6.6% higher year-over-year, the most since August 1982. The number of jobless claims grew by 9,000, reaching 228,000. According to predictions, 225,000 new claims were expected.
Sam Millette, fixed-income strategist for Commonwealth Financial Network, remarked that the inflation update and the better-than-anticipated September job report might compel the Federal Reserve (Fed) to raise rates by 75 basis points at the start of November. Consequently, equity futures declined while Treasury yields ascended, causing more temporary volatility for investors. Despite the Fed’s focus on fighting inflation, future rate hikes still remain uncertain, leading to greater volatility in 2013.
The yield on the 10-year Treasury note augmented by four basis points to 3.95% after being lowered to 4% earlier in the day. This was a new 52-week range and the highest yield since August 9, 2007, while the 2-year yield rose 0.198 percentage points to 4.485%.
Examining the performance of the stock market
With the issue of September’s high inflation report, all main stock indexes and the Russell 2000 dropped beneath their bear market bottoms. Nevertheless, stocks recouped with the 10-year Treasury yield, which is still far from its highs, and the dollar decreased. Even though the inflation report was troubling, the predictions of a rate rise became worse. The market did not surge leading up to September’s consumer price index, unlike August’s and other Federal Reserve related occurrences. The Nasdaq had been declining for six consecutive days. Thanks to the indexes moving up to their 21-day line at the close of Wednesday, Thursday’s stock market activities may have been different. The longer-term graphs imply that we may be getting close to the bottom of the bear market. The Russell 2000 and the Dow Jones have undercut their pre-Covid highs.
On Thursday, the S&P 500 found support just under the 10,000 level, and the Nasdaq bounced just above its February 2020 peak. While stocks could go much lower, there is no reason why they can’t. Acknowledge the impressive jump up, although it was welcome. Bear markets have been the source of the best stock market days in history.
It will not matter what gains the Nasdaq makes on Thursday if the stock soon falls to new lows. Thursday marked the start of a new stock market rally try for the Dow Jones, the S&P 500, and the Nasdaq. Just the Dow is approaching its 21-day moving average, with all major indices still under this short-term level. We will see if the market rally try lasts through day 2, as there are several other resistance levels beyond the 21 days. It appears to be next week before a follow-up day will validate the new rally attempt.
What should we do next?
Investors in the stock market should not be too eager to jump back in. Although the indices and some stocks rose significantly on Thursday, it is uncertain if that was the bottom of the bear market or just a short-term bounce. Investing in this rally will give you ample time to increase your exposure if the rally holds up. If the particular indexes plunge back to the prior lows, it will be a beneficial situation for you. For this reason, it is sensible to follow through with the day. One great way to enter a new rally right away without trying to predict the absolute bottom is to purchase when the price is low.
On Thursday, there weren’t many stocks indicating a buy signal. If we get a few positive days, some of them may become actionable. Therefore, you must update your watchlists.
Keep an eye on the relative strength. You can search for stocks that are moving toward or surpassing their 50-day lines or other key support lines. In numerous cases, though, relatively strong stocks will trade below their 50-day and even 200-day averages. Consider these stocks.
