Updated at 11:35AM EST
US stocks were volatile again on Friday, following a fiery session on Wall Street yesterday that saw the biggest swing from the lowest to the peak of the Dow in more than two years, as investors navigated a string of big bank earnings and merger news.
In fact, market volatility has been high since September’s higher-than-expected inflation reading yesterday which mainly boosted the case for significant rate increases by the Fed between now and the end of the year.
The CBOE Group’s Vix Volatility Index, often referred to as the “fear gauge,” was up 1.5% early Friday at 32.3 points, indicating another wild ride for Wall Street to close out the week.
The catalyst for yesterday’s rally, which included a 1,500-point swing in the Dow and the largest intraday move for the S&P 500 in nearly a year, remains uncertain, but equity investors appear to have been surprised by the early morning move, which followed the September inflation data. Which showed a rise in core consumer price pressures and a faster-than-expected core rate of 8.2%.
A closely tracked Flow Show report from Bank of America indicates that investors were flocking with huge amounts of cash to yesterday’s inflation reading, while the market itself was largely oversold, with about two-thirds of Nasdaq shares trading 33% below their highs. At 52 weeks.
The September inflation reading, which included a key rate of 8.2%, effectively shuts out the possibility of a 75% rate hike next month from the Federal Reserve, which would push the fed funds rate to a range of 3.75% to 4%, with bets On a follow-on move of the same size to end the year at around 62%.
Last night’s rally also led to solid gains for stocks in most global markets overnight, with Japan’s Nikkei 225 index up 3.25% and the MSCI Asia index rising 1.66% region-wide.
Stocks in Europe were also steadily higher, with London’s FTSE 100 closing 0.07% higher amid a humiliating turn in planned tax cuts and borrowing increases from embattled Prime Minister Liz Truss – who also sacked her finance minister after just 38 days in office – a move. It is seen as easing tensions in the country’s bond market, which has been subject to the intervention of the Bank of England over the past two weeks.
On Wall Street, investors headed to Friday’s session with their eyes on big bank earnings and what could be a key reading of retail sales strength for September, with data arriving at 8:30 AM ET.
The Commerce Department said sales stabilized to an upwardly revised figure for August of $684 billion as a slowdown in gas prices and higher inflation in rents, travel and health care curbed growth in discretionary spending.
Investors are also eyeing the impact of the big deal in the grocery market, with Kroger (K) Approval of $25 billion acquisition of Albertsons (ACI) .
The S&P 500 fell 48 points late in the morning, while the Dow Jones Industrial Average eased 175 points from its 828-point high last night, the biggest one-day gain since November of 2020. The tech-focused Nasdaq fell by 182 points. .
The benchmark 10-year bond yield jumped to 4.022% in New York trading while the dollar index, which measures the US currency against a basket of its global peers, rose 0.6% at 113.081.
The busy earnings session has a series of stocks moving on Friday, although the name of the most active pre-market was Beyond Meat (BYND) which fell 4.6% after slashing its 2022 sales forecast and unveiling a raft of job cuts.
City Group (c) It posted better-than-expected third-quarter earnings, but a significant dip in investment banking revenue, as well as higher operating expenses, pressured the shares in pre-market trading.
Wells Fargo (WFC) It posted weaker-than-expected third-quarter earnings as it set aside nearly $800 million in credit reserves, but a big jump in net interest income helped boost the lender’s overall revenue after Street’s forecast strongly.
c. B. Morgan Chase (JPM) It posted better-than-expected third-quarter earnings, with nearly $1 billion set aside to cover potential bad loans in the weak domestic economy, as income from higher interest rates offset a dip in global dealmaking.