Lower than expected inflation number drives markets higher

Stocks rallied on Tuesday, building on their strong November gains, as Wall Street cheered new U.S. inflation data that raised hope of the Federal Reserve wrapping up its rate-hiking campaign.

CPI was flat last month, while economists polled by Dow Jones expected a gain of 0.1% month over month. So-called core CPI, which stripped out food and energy prices, was also lower than expected and the slowest in two years. This instilled optimism into the market that the Federal Reserve could finally end its rate-hiking campaign for good.

Following the report, fed-funds futures showed that traders had removed any chance of a hike in December, from 14% odds prior.

The Dow Jones Industrial Average jumped 489.83 points, or 1.43%, to end at 34,827.70. The S&P 500 rallied 1.91%, briefly trading above the key 4,500 level, to settle at 4,495.70. It was the best day since April for the broad-market index. The Nasdaq Composite jumped 2.37% to close at 14,094.38.

Tuesday’s gains added to an already stellar performance this month for stocks. The S&P 500 and Dow are up 7.2% and 5.4%, respectively, in November. The Nasdaq is up 9.7%, on pace for its biggest monthly gain since January.

Bank stocks such as Bank of America and Wells Fargo jumped on the hope that the economy could skirt a recession.

Shares of Home Depot, which were up 5% on better-than-expected third-quarter earnings, led the gains for the Dow. Enphase Energy, Boston Properties, and SolarEdge Technologies— each up more than 10% — led the S&P higher.

The Technology Select Sector SPDR Fund (XLK), which tracks the tech stocks in the S&P 500, closed at a record high, as investors returned to the sector that had been one of the hardest hit by rate hikes. Shares of Tesla gained more than 6%.

Turning to all US sectors, all closed higher overnight. Real Estate was the best performer, closing 5% higher. Energy recorded the fewest gains.

In commodity news, Glencore will acquire a majority stake in Teck Resources’ coal business for $6.93 billion, marking a strategic move to exit the thermal coal industry and concentrate on metals for the energy transition. They plan to create a new company for the combined coal operations on the New York Stock Exchange within two years. Pending Canadian government approval, the deal implies an enterprise value of $9 billion for Teck's coal business.

Iron ore spot prices are nearing $130 US dollars a tonne. This is the highest level since March 2023.

The recent improvement in China's property sector has led to an increase in commodities prices. This fosters optimism that China may increase infrastructure investments as part of its efforts to stimulate the economy, given the significant impact of both sectors on steel demand.

The US and Indonesia are in early discussions about collaborating on critical-mineral supplies, with a focus on reducing the US's reliance on China for these resources. This initiative was highlighted during a meeting between leaders from both countries at the White House.

Futures

The SPI futures are pointing to a 1.3 per cent gain.

Currency

One Australian dollar at 8:30 AM was buying 65.07 US cents.

Commodities

Gold added 0.86 per cent. Silver gained 3.56 per cent. Copper added 0.33 per cent. Oil fell 0.04 per cent.

Figures around the globe

European markets closed higher. London’s FTSE added 0.20 per cent, Frankfurt gained 1.76 per cent, and Paris closed 1.39 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei added 0.34 per cent, Hong Kong’s Hang Seng fell 0.17 per cent while China’s Shanghai Composite closed 0.31 per cent higher.

The Australian share market closed 0.83 per cent higher at 7007.

Ex-dividends
Dicker Data (ASX:DDR) is paying 10 cents fully franked
Plato Inc Max (ASX:PL8) is paying 0.55 cents fully franked

Dividends payable
Waypoint REIT (ASX:WPR)
Autosports Group (ASX:ASG)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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