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 822 points, or 2.8%, recovering from a 500-point drop earlier in the day. The S&P 500 ticked up 2.42%, and the Nasdaq Composite gained 2.07%.
The choppy session saw stocks fall to their lowest levels since 2020 following hotter-than-expected inflation data and then post a stunning rebound. The Dow regained more than 1,300 points as traders digested the September consumer price index report. The S&P 500 posted its widest trading range since March 2020, going from being down 2.39% to rising 2.39%.
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Gains in energy and bank stocks led the reversal. Shares of Chevron gained nearly 5% as oil prices spiked, and bank stocks Goldman Sachs and JPMorgan rose 4.21% and 5.76%, 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.
Investors may be betting that the stronger-than-expected inflation report means price increases will peak soon.
"Maybe 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.
Stocks fell to session lows when the September consumer inflation report showed a larger-than-expected increase. 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%. Persistent high inflation could mean that the Federal Reserve is more aggressive with future interest rate hikes and keeps rates higher until price increases cool off.
Thursday's CPI report comes a day after the government said the producer price index, another inflation gauge, rose more than expected.
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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