Stocks Bounce Back After Oil Prices Ease and Inflation Data Meets Expectations
US stocks rebounded on Friday, clawing back much of their losses for the week after oil prices eased and inflation data came in near expectations.
The S&P 500 rose 1% to break a four-day losing streak, its longest since June. The Dow Jones Industrial Average gained 479 points or 0.9%, while the Nasdaq composite was up 1.2%. A pullback in oil prices helped calm the market, as Brent crude fell 2.5% to $104.93 after reaching a high of near $110.
The inflation data showed US consumers paid 3.4% more for gasoline, food, and other living costs last month compared to the same period last year. While still high, this was close to what economists expected, and it strengthened expectations that the Federal Reserve will hike its main interest rate at its meeting next week.
This move is typically used by the Fed to combat inflation by making borrowing more expensive and slowing the economy. As a result, the yield on the two-year Treasury rose to 4.60% from 4.56%, while longer-term yields eased, indicating investors see upcoming hikes as helping control inflation in the long term.
Economists believe rate hikes will help restore the Fed's credibility and reassure markets that it will do what's needed to bring down inflation, even if it causes short-term pain for the economy. However, consumer sentiment is still souring, with expectations for inflation next year jumping to 4.6% from 4% last month.