U.S. Stocks Holding On To Strong Gains After Early Rally

wallstreet oct22 15nov22 lt

After moving sharply higher early in the session, stocks continue to turn in a strong performance in afternoon trading on Tuesday. The upward move on the day has largely offset the pullback seen in the previous session.

While the Dow has pulled back well off its best levels of the day, the Nasdaq and S&P 500 continue to post strong gains. The Dow is up 119.80 points or 0.4 percent at 33,656.50, the Nasdaq is up 235.95 points or 2.1 percent at 11,432.17 and the S&P 500 is up 47.57 points or 1.2 percent at 4,004.82.

The rally on Wall Street comes following the release of a Labor Department report showing producer prices in the U.S. crept up by much less than expected in the month of October.

The Labor Department said its producer price index for final demand inched up by 0.2 percent in October, matching a revised uptick in September.

Economists expected producer prices to climb by 0.5 percent compared to the 0.4 percent increase originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed to 8.0 percent in October from 8.4 percent in September. The year-over-year growth was expected to edge down to 8.3 percent.

Following last week's tamer-than-expected consumer price inflation report, the data has added to optimism about the Federal Reserve slowing the pace of interest rate hikes as soon as next month.

"It's premature to conclude a dovish Fed pivot is on the way, though Vice Chair Lael Brainard's comments yesterday, on top of downside surprises in both October CPI and PPI reports, raise the odds," said Will Compernolle, Senior Economist at FHN Financial.

CME Group's FedWatch Tool is currently indicating an 80.6 percent chance the Fed will raise rates by 50 basis points next month and a 19.4 percent chance of another 75 basis point rate hike.

The strength on Wall Street also comes amid a surge by shares of Walmart (WMT), with the retail giant spiking by 7.4 percent.

The jump by Walmart comes after the company reported better than expected third quarter results and announced a $20 billion share buyback.

Sector News

Semiconductor stocks continue to turn in some of the market's best performances on the day, with the Philadelphia Semiconductor Index spiking by 3.9 percent to its best intraday level in well over two months.

Taiwan Semiconductor (TSM) is posting a standout gain on news Warren Buffett's Berkshire Hathaway has bought more than $4.1 billion of the chipmaker's stock.

Substantial strength also remains visible among airline stocks, as reflected by the 2.6 percent surge by the NYSE Arca Airline Index. The index has also soared to a more than two-month intraday high.

Retail stocks also remain sharply higher following the upbeat earnings news from Walmart, resulting in a 2.1 percent jump by the Dow Jones U.S. Retail Index.

Housing, brokerage and networking stocks are also seeing considerable strength on the day, reflecting broad based buying interest.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index inched up by 0.1 percent, while China's Shanghai Composite Index jumped by 1.6 percent and Hong Kong's Hang Seng Index spiked by 4.1 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index edged down by 0.2 percent, the German DAX Index and the French CAC 40 Index both rose by 0.5 percent.

In the bond market, treasuries have pulled back well off their best levels of the day but remain in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.4 basis points at 3.831 percent.

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