Stocks Gain After More Encouraging Inflation Data as Rally Continues

U.S. stocks ticked higher Wednesday, as traders tried to extend a strong rally from the previous session on the back of more encouraging inflation data. Wall Street also had its eyes on Washington as lawmakers tried to avoid a government shutdown.

Target (TGT) reported third-quarter adjusted earnings of $2.10 a share, beating analysts’ estimates of $1.47, and shares of the retailer jumped 14% in moring trading.

October’s producer price index, which measures wholesale prices, fell by 0.5% to mark its biggest monthly drop since April 2020. Not all of the economic data was positive, however, since retail sales also declined.

The S&P 500 climbed 1.9%, while the Nasdaq Composite popped about 2.4% higher. It was the best day since April for both indexes. The 30-stock Dow added nearly 490 points, or 1.4%.

These gains came after October’s consumer price index, a key inflation metric, came in lower than the 0.1% increase economists surveyed by Dow Jones had expected. Instead, the CPI came in flat on a monthly basis. Investors celebrated the news, sending stocks soaring on the hopes that the Federal Reserve could finally put an end to its rate-hiking campaign.

“The CPI report did basically everything that the market needed to do, which is to confirm disinflationary trend, cooling economy and ultimately put the final pin in the case for the Fed popping [interest rates] again in December,” said Ross Mayfield, investment strategy analyst at Baird.

Mayfield added that he doesn’t believe the U.S. central bank will cut rates anytime in the near term, since the housing market remains strong at the moment.

The gains in U.S. futures were led by shares of Target, which popped 13% on better-than-expected results for the third quarter.

Late Tuesday, the House of Representatives passed a bill to avert a government shutdown. The measure will go to the Senate for a vote. If cleared by lawmakers, the legislation goes to President Joe Biden. Without a funding bill, the federal government is slated to shut down at the end of the week.