Stocks surge as inflation falls more than expected

In October, consumer price inflation in the US decreased, marking a slowdown after two consecutive months of increases. The moderation in inflation was even greater than expected, leading to a significant rise in US stocks. This provided some relief to Americans who have been dealing with high prices for the past two years.

According to data from the Bureau of Labor Statistics released on Tuesday, the Consumer Price Index rose 3.2% for the 12 months ending in October, down from September’s 3.7%.

On a monthly basis, prices remained unchanged for the first time since July 2022. The previous month had seen a 0.4% increase, driven by higher gas and rent costs.

Following this news, the Dow rose by 365 points or 1.1%, while the S&P increased by 1.5% and the Nasdaq Composite rose by 2%.

The report showed that energy prices decreased in October, but this was offset by the continued rise in shelter costs.

Greg McBride, chief financial analyst at Bankrate, stated that the ongoing moderation of inflation is likely to keep the Federal Reserve from taking any action in December. However, he noted that the Fed will remain cautious due to persistently high core inflation and will keep their options open heading into 2024.

Economists had predicted a 0.1% monthly increase and a 3.3% year-over-year gain, according to Refinitiv consensus estimates.

There was also positive news regarding underlying inflation. Core CPI, which excludes the more volatile food and energy categories, increased by 0.2% monthly, bringing the annual increase to 4%. This represents the lowest yearly increase since September 2021.

Compared to the previous month, core CPI increased at a slower pace, and the October figures surpassed expectations of a 0.3% monthly increase and a 4.1% annual gain.

This story is still developing and will be updated.