Global stocks Ease Fears of a Bullish Rate after low US Inflation

NEW YORK (AP) – Wall Street is working a little more on its spectacular jump a day earlier in Friday morning trading, putting it on track for strong gains for the week.

The S&P 500 was up 0.6% in one day after rising 5.5% on its best day since the spring of 2020. The Dow Jones Industrial Average was down 41 points, or 0.1%, at 33,674, after rising more than 1,200 points in a day. Previously, while the Nasdaq Composite was up 1.2%, as of 10:21 a.m. Eastern Time.

Markets rose after China eased some of its strict anti-COVID measures, which are hurting the world’s second-largest economy. Expectations of further economic growth from China propelled not only stocks but also oil prices, with US crude rising more than 4% to $90 a barrel.

Thursday’s huge rally for Wall Street comes after a report showed inflation in the United States slowed more than expected over the past month. That raised hopes that the worst of inflation could be over and the Federal Reserve could take a less aggressive approach to raising interest rates, although analysts and economists cautioned that higher inflation could remain stickier than expected on the way down. Such rate hikes can trigger a recession and drive down stock prices.

As important as how bad inflation is at the moment, how high American households see it in future years. This is because too high expectations can trigger a vicious cycle where people tend to rush buying and take other steps that only exacerbate inflation.

Currency traders work in the forex dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, November 11, 2022. Asian stock markets rose on Friday after a more-than-expected fall in US inflation, fueling hopes that the Federal Reserve may be largely down plans for more interest rate hikes. 

In the forex dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, a currency trader spreads near the screen showing the Korea Composite Stock Price Index (KOSPI), on the left, and the exchange rate of the South Korean won against the US dollar Is. Friday, November 11, 2022. Asian stock markets rallied on Friday after lower-than-expected US inflation eased on hopes the Federal Reserve may ease plans for more interest rate hikes. 

FILE – Statues are decorated at the New York Stock Exchange, Tuesday, September 13, 2022 in New York. Wall Street is rising at the opening bell on Thursday, November 10, after a government report showed inflation was lower than economists last month. 

The Fed has said it follows such expectations closely and that stopping such a doom loop is one of the reasons it has moved so aggressively on rate hikes. Inflation expectations have been relatively high lately, but not enough to cause panic at the Federal Reserve. A preliminary report on Friday suggested that American households are not exceeding those expectations.

According to a survey by the University of Michigan, the average expectation of inflation in households in the coming year rose to 5.1% from 5% a month earlier. Meanwhile, long-term inflation expectations ticked up to 3%. But it is still within the same 2.9% to 3.1% range where it has been for 15 out of the last 16 months.

The Fed raised its key overnight interest rate from 3.75% to 4%, originally from zero in March. There is a possibility that there may be a further increase in the next year, and then rates may be maintained at that high level for some time.

The hope for markets is that softening inflation could mean the Fed will be at a lower, less painful level for the market than it would have otherwise.

According to the CME Group, traders are now increasingly betting that the rate could range between 4.75% and 5% by early next year. A week earlier, they saw a higher final rate more likely, with a large portion expecting 5.25% to 5.50%.

Bond markets are closed for business on the occasion of Veterans Day. On Thursday, yields fell as investors scaled back their expectations of how aggressively the Fed will raise rates.

The S&P 500 is heading for its third weekly gain in the past four, and its 5.5% gain is on track to be its biggest since June.

Meanwhile, in the crypto market, prices are sinking again amid the latest crisis of industry confidence. One of the big crypto trading platforms, FTX, filed for bankruptcy protection after its users scrambled to withdraw their money over fears about their financial strength.

The exchange and its founder are being investigated by the Justice Department and the Securities and Exchange Commission, and rivals have said that FTX’s failure could undermine trust in the system as a whole.

According to CoinDesk, bitcoin fell below $16,900, down 4.6% from a day earlier. It hit a record low around $69,000 a year ago, and was up from $21,000 a week ago.