US Equity Indexes Turn Corner in Midday Trading as Slowdown in Fed's Preferred Inflation Gauge Soothes Frayed Nerves

US equity indexes jumped, recovering from a plunge pre-bell, as benign inflation data helped alleviate concern that the government is heading for a partial shutdown.

The S&P 500 soared 1.7% to 5,967.8, with the Nasdaq up 1.8% to 19,707.4 and the Dow Jones Industrial Average 1.8% higher at 43,094.9. All sectors were up intraday, with real estate, healthcare, and financials leading the gainers.

The Dow and the Nasdaq were each down more than 250 points, and the S&P 500 was 50 points lower before the market opened for regular trading. While concern remains that the US government is heading for a partial shutdown, the Federal Reserve's preferred inflation data released Friday offered some relief as month-over-month price growth slowed. The CBOE's Volatility Index (VIX), known as the fear gauge, sank by 24% after midday.

A bill proposed by House Republicans that would suspend the debt ceiling for two years and fund the government for three months failed late on Thursday, indicating that a partial shutdown will begin tonight if the Friday deadline to reach a deal runs out, according to a research note from D.A. Davidson. House Speaker Mike Johnson, who negotiated the original bipartisan deal rejected by President-Elect Trump, told reporters he has a plan and expects a vote again, CNN reported.

In economic news, the headline PCE price index grew 0.1% in November versus a 0.2% increase in October. Year over year, inflation climbed to 2.4% from 2.3. Wall Street was expecting 0.2% sequential and 2.5% annualized. The Fed's preferred core measure, which excludes food and energy, was flat at 2.8% annually but eased to 0.1% from 0.3% sequentially. The market predicted 2.9% and 0.2% growth, respectively.

US Treasury yields were mixed intraday, with the 10-year down 4.8 basis points to 4.52%.

In company news, Nike (NKE) reported a decline in fiscal Q2 earnings and revenue. Truist Securities said Chief Executive Officer Elliot Hill's accelerated turnaround efforts are driving pressure on the outlook for H2 fiscal 2025.

FedEx's (FDX) fiscal Q2 earnings rose more than analysts had expected while revenue missed forecast. The parcel delivery group unveiled plans to spin off its freight operations into a separate publicly listed company.

West Texas Intermediate crude oil futures fell 0.7% to $68.91 a barrel.