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The S&P 500 registered the fifth-largest intraday reversal from the low in the history of the markets.
Thursday, October 13, was a day of major volatility on Wall street. The US released its inflation data for the month of September 2022 which turned out to be 0.6% higher than the previous month.The red-hot inflation was enough to put instant selling pressure on the market. After dropping more than 500 points earlier in the day, the Dow Jones Industrial Average managed to close the day in the green. The Dow Jones (INDEXDJX: .DJI) rallied more than 800 points by the day-end. On Thursday. the Dow Jones closed 2.83% above 30,000 levels. Other indices such as the S&P 500 (INDEXSP: .INX) and the Nasdaq Composite (INDEXNASDAQ: .IXIC) also made 2.6% and 2.23% gains respectively.
The early hours of the trading session remained extremely choppy with stocks falling to their lowest levels since 2020. However, the Dow Jones regained more than 1,300 points on the same day and managed to go into the green zone. Interestingly, the S&P 500 also posted its widest trading range since March 2020. It was also the fifth-largest intraday reversal from the low in the history of the S&P 500.
The banking and energy stocks majorly led to the rebound. As the oil prices peaked, shares of Chevron jumped 4.85%. Similarly, banking giants like Goldman Sachs and JPMorgan also jumped 3.98% and 5.56%, respectively.
Some analysts believe that investors are factoring that the stronger-than-expected inflation means that it might be peaking out soon. Liz Ann Sonders, chief investment strategist at Charles Schwab expects more volatility to continue as investors digest inflation data and earnings season kicks off. Ann Sonders added:
“Maybe we get this last gasp higher in inflation and from here we start to decelerate. I think there’s still plenty of things that could drive volatility and intraday swings are just the nature of the beast right now”.
The Fed Action to Follow
Amid this persistent higher inflation, the US Federal Reserve will be forced to raise interest rates further. As per analysts, the Fed could be announcing another 75 basis points rate hike next month in November. Analysts also expect the Fed to raise interest rates up to 4.25-4.5%.
But some market analysts also think that the market reversal is a reflection of the sentiment. Jeff DeGraaf, chairman and head of technical research at Renaissance Macro Research told CNBC:
“Sentiment has really been one of the primary bullish, or more persistent bullish attributes of the market. I think people were positioned pretty bearishly going into this number”.
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