US Stocks Move Around CPI, Benchmarks Back in the Green

• US stocks bounce in midday trading despite US CPI release.
• The bulls have entered Wall Street in a sack.

US stocks they are re-entering positive territory, following the sell-off that occurred before the market opened in the wake of the Consumer Price Index data. Equities fell to year lows, but bulls entered at a deep discount, sending the Dow Jones and S&P 500 up as much as 2% at one point.

Core CPI rose at its highest annual pace in 40 years, up 0.6% on the month and 6.6% on the year, and Fed Funds futures are pricing 75 basis points in December, vs. 50. Additionally, terminal rate expectations rose to 4.85% in March. As a consequence, the 10-year Treasury yield recovered to 4,080%, while the 2-year yield rose to 4,535%.

The report follows data on Wednesday that showed US producer prices rose more than expected in September and, along with the CPI, money market traders are pricing in a near 91% chance of a fourth consecutive hike of 75 basis points by the Fed at its meeting next month, with some also pricing in a 9% chance of a 100 basis point hike.

Nonetheless, markets are uncovering some prices ahead of Q3 gains later in the week, while indices are at the bottom of a 50% correction from the March 2020 rally. At 1:33 p.m. . ET, the Dow Jones Industrial Average was up 851 points, or 2.93%, at 30,062 and had recovered from the day’s low at 28,660.94. The S&P 500 rose 93.80 points to 2.62%, while the Nasdaq Composite rose 253 points, or 2.34%, to 11,037.

S&P 500 weekly chart

At the 50% bull market signal of March 2020, the index is carving out an M formation that would be respected to see the market move into the neckline with a 50% mean reversal falling on the highs for the month so far about 3,806.