The US equity markets experienced a notable recovery after a steep decline prior to the market opening, driven by favorable inflation figures that alleviated worries of an impending partial government shutdown. The S&P 500 surged by 1.7% to reach 5,967.8, while the Nasdaq climbed 1.8% to 19,707.4, and the Dow Jones Industrial Average also rose by 1.8% landing at 43,094.9.
All sectors experienced gains during intraday trading, with real estate, healthcare, and financials leading the pack. Prior to the market's regular trading hours, stocks were in a downturn, with the Dow and Nasdaq each dropping over 250 points and the S&P 500 down by 50 points. While concerns linger about the potential for a partial shutdown of the US government, the inflation data, favored by the Federal Reserve, released on Friday provided some comfort, revealing a slowdown in month-over-month price growth.
The CBOE's Volatility Index (VIX), often referred to as the fear gauge, dropped by 24% post-lunch as a reaction to the news. A bill proposed by House Republicans aimed at suspending the debt ceiling for two years and funding the government for three months did not pass late Thursday, indicating that without an agreement by Friday, a partial shutdown could commence today as stated in a research note from D.A.
Davidson. House Speaker Mike Johnson, who previously negotiated the bipartisan deal that was rejected by President-Elect Trump, mentioned to reporters that he has a strategy and anticipates another vote soon, as reported by CNN. Turning to economic indicators, the headline PCE price index saw a modest increase of 0.1% in November, a slight decrease from the 0.2% rise observed in October.
On a yearly basis, inflation edged up to 2.4% from 2.3%. Analysts on Wall Street had anticipated a sequential increase of 0.2% and an annualized rate of 2.5%. The Fed's core measure, excluding food and energy costs, remained unchanged at an annualized rate of 2.8%, but showed a decline from 0.3% to 0.1% on a sequential basis.
Predictions for these metrics had been set at 2.9% and 0.2% growth, respectively. As for Treasury yields, the day saw mixed results, with the 10-year yield decreasing by 4.8 basis points to rest at 4.52%. In corporate updates, Nike reported a dip in fiscal second-quarter earnings and revenue. Truist Securities highlighted that CEO Elliot Hill's rapid turnaround initiatives exerted pressure on the outlook for the second half of fiscal 2025.
FedEx, on the other hand, announced that its fiscal second-quarter earnings exceeded analyst expectations, although its revenue fell short of forecasts. The parcel delivery service revealed plans to separate its freight operations into a publicly listed company. Meanwhile, West Texas Intermediate crude oil futures declined by 0.7% to $68.91 a barrel..