What’s going on

• The S&P 500
  SPX,
  +3.96%
  rose 155 points, or 4.2%, to 3,904.

• The Dow Jones Industrial Average
  DJIA,
  +2.53%
  climbed 853 points, or 2.6%, to 33,367.

• The Nasdaq Composite advanced 590 points, or 5.7%, to 10,943.

On Wednesday, the Dow Jones Industrial Average fell 647 points, or 1.95%, to 32514, in its biggest percentage-point drop since Oct. 7. The S&P 500 declined 80 points, or 2.08%, to 3749, and the Nasdaq Composite dropped 263 points, or 2.48%, to 10353.

The Nasdaq Composite was down 35.5% from its record close of 16057.44 hit Nov. 19, 2021. For all three indexes, the drop — which came after three days of consecutive gains — marked the biggest post-election day pullback since 2012, according to Dow Jones Market Data.

What’s driving markets

U.S. stocks rocketed higher after the release of the consumer price inflation figures on Thursday, with the Dow on track for its biggest point gain since May 4, according to Dow Jones Market Data, while the S&P 500 and Nasdaq were both on track for their biggest percentage-point gains since April 6.

The S&P 500 also briefly touched its highest intraday level since mid-September, while the Dow touched its highest level since August.

According to the data from the U.S. Bureau of Labor Statistics, headline inflation retreated on a year-over-year basis to 7.7% while the year-over-year core number declined to 6.3%. On a month-over-month basis, headline inflation came in at 0.4%, while core inflation softened to 0.3%.

See: U.S. inflation shows signs of easing, CPI finds, and might give Fed ammo to go slower

The CPI report was “exactly the kind of confidence the market needed to re-instill the risk-on environment that had started last Friday,” said Art Hogan, chief market strategist at B.Riley Wealth. U.S. stocks had rallied for three straight sessions before Wednesday’s wipeout, which was the worst post-election day performance for the major U.S. indexes on a percentage-point basis since 2012.

“What’s important about all this is we had some very important events this week and both played out in a favorable way for markets,” Hogan added, a reference to both the inflation data and the expectation that Republicans will control the House once all the votes are tallied from Tuesday’s midterms.

Shortly after the data were released, the Wall Street Journal’s Nick Timiraos reported that the October report “is likely to keep the Fed on track to approve a 50-basis-point interest-rate increase next month.”

Fed funds futures traders were pricing in higher than 80% of a 50 basis point rate hike in December, compared with below 60% odds one day earlier, compared with the CME’s FedWatch tool.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.840%
retreated below 4%, helping to drive stocks higher, falling 29.8 basis points to 3.849%, on track for its biggest daily drop since March 18, 2009, according to DJMD.

The ICE U.S. Dollar Index
DXY,
-1.98%
was off 1.8% at 108.61 in recent trade as the euro rose to its highest level against the buck in roughly two months.

While equity investors were clearly pleased with the October inflation data, one economist noted that the CPI report won’t be the last important inflation-related reading of the week.

“Markets are applauding the cooler inflation print and expectations for a downdraft in rates has begun with expectations for the December 14th rate hike anchored at 50 basis points,” said Quincy Krosby, chief global strategist for LPL Financial.

“Still, markets need to absorb Friday’s University of Michigan’s Consumer Sentiment Survey that includes consumer 5-10 year consumer inflation expectations, which has climbed to an uncomfortable 2.9%.”

All 30 components of the Dow were trading in the green Thursday, led by Salesforce Inc.
CRM,
+7.00%
and Microsoft Corp.
MSFT,
+6.03%
All 11 S&P 500 sectors were trading in the green.

Investors will also need to digest the November CPI report, due early next month, before the Federal Reserve meets again to decide the size of the next rate hike.

In other markets, Bitcoin
BTCUSD,
+11.39%
was recovering some ground early Thursday after falling to its lowest level since 2020 this week on expectations that FTX and its related companies might be headed for insolvency. The price of bitcoin was up 5% in the last 24 hours accord to $17,449 per coin as of early Thursday.

Single-stock movers

• The modest rebound in the price of bitcoin and other cryptocurrencies was helping to lift some crypto-linked stocks on Thursday. MicroStrategy Inc.
  MSTR,
  +10.31%,
  Riot Blockchain Inc.
  RIOT,
  +9.08%
  and Coinbase Global Inc.
  COIN,
  +12.29%
  were all up sharply.

• SVB Financial Group 
  SIVB,
  +12.77%
  shares rose nearly 13%.