To The Moon

Daily market update 

The S&P 500 rose Tuesday after another report signaled that inflation could be slowing.

The broad market index advanced 0.6%, while the tech-heavy Nasdaq Composite gained 1.2%. Meanwhile, the Dow Jones Industrial Average was flat. Earlier in the day it rose as much as 450 points.

Major indexes traded off their highs, with the Dow and S&P briefly dipping into the red, after crude oil prices moved higher suddenly. Oil prices later eased from those highs, with West Texas Intermediate futures last up 1.2% at $86.90 per barrel.

The major averages initially rallied after the producer price index, a measure of wholesale inflation, showed a 0.2% increase for the month of October, versus the consensus estimate for a 0.4% increase from Dow Jones. The report comes after last week’s consumer price index data showed signs of inflationary pressure abating last month, sparking a sharp rally.

“The PPI read certainly adds more fuel to the fire for those who feel we may finally be on a downward inflation trend,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office. “The market embraced last week’s consumer downtick and today’s initial reaction seems to be more of the same.”

The peak-inflation narrative is gaining traction, but the bar for a Fed pivot is still high, said Ross Mayfield, investment strategy analyst at Baird.

“There will be trepidation at the central bank given their credibility concerns and desire to avoid the mistakes of the 1970s (i.e., stop and start policy that prolonged the inflationary spell),” he said. “But the crumbs are already being laid for a deceleration in pace of tightening heading into 2023.”