Stocks rose in volatile trading Thursday, recovering from steep losses earlier in the session, as traders assessed the latest U.S. inflation data and what it means for the Federal Reserve going forward.
The Dow Jones Industrial Average rose 518 points, or 1.78%, recovering from a 500-point drop earlier in the day. The S&P 500 ticked up 1.64% and the Nasdaq Composite gained 1.43%.
Stocks rebounded after hitting their lowest levels since 2020 led by gains in energy and bank stocks. Shares of Chevron gained more than 3% as oil prices spiked, and bank stocks Goldman Sachs and JPMorgan rose 2.9% and 4%, respectively. A reversal in big tech names such as Apple and Microsoft and a surge in semiconductors Nvidia and Qualcomm also contributed to the move higher.
In addition, investors may be betting that the stronger-than-expected inflation report means price increases will peak soon.
"We get this last gasp higher in inflation and from here we start to decelerate," said Liz Ann Sonders, chief investment strategist at Charles Schwab. She added, however, that swings in stocks are likely to continue as investors digest more inflation data and earnings season kicks off.
"I think there's still plenty of things that could drive volatility and intraday swings are just the nature of the beast right now," she said.
Earlier, stocks fell to session lows when the September consumer inflation report was higher than economists expected. The consumer price index increased 0.4% for the month, more than the 0.3% estimate from Dow Jones. On an annual basis, inflation was up 8.2%.
Thursday's CPI report comes a day after the government said the producer price index, another inflation gauge, rose more than expected.
Investors also digested minutes from the September Federal Reserve meeting, released Wednesday. The minutes showed the central bank expected to keep hiking interest rates until it sees receding inflation. But one comment made some think the Fed might instead slow the rate hikes, if not roll them back, if financial markets tumult continued.
Going forward, investors will be watching the start of earnings season. On Friday, major banks JPMorgan Chase, Wells Fargo, Morgan Stanley and Citigroup all report results.
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