U.S. stocks ended sharply higher on Thursday, after a stunning, whipsaw reversal following a disappointing consumer prices report, as technical support helped drive the rebound.
The Dow finished up 2.8%. The S&P 500 rose 2.6%, while the Nasdaq ended 2.2% higher.
Stocks had plummeted earlier in the day after the headline consumer price index rose at an annual pace of 8.2% in September, a higher rate than expected, all but affirming the Federal Reserve will stay the course with its aggressive plan to hike interest rates.
David Spika, chief investment officer at GuideStone Capital Management, explains what he thought prompted the market’s wild swing higher.
“Well, when the CPI number first came out it was much higher than expected and, as you would expect, rates rose and the market declined. However, I think once people stepped back, they said, ‘You know what? We knew the Fed was going to have to continue to be very aggressive. We knew inflation was still going to be a problem. So we probably overreacted.’ And so you’ve seen rates fall and that propelled the move higher in the stock market. That doesn’t mean this thing’s over with, we still have a long way to go. And we still feel like the next shoe to drop will be when the market starts pricing in the inevitable earnings decline that comes with a recession.”
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