Dow rallies 500 points as stocks rebound from inflation fears
Stocks are rallying sharply on Thursday with the Dow gaining some 500 points mid-morning. Worries about sudden spikes in inflation, which weighed on the market at the start of the week, were brushed off in favor of a rebound.
The Dow rose 1.5%, or 500 points, while the S&P 500 was up 1.4%. The Nasdaq Composite, which booked the biggest losses over the past few days, was up 1.3%.
All week, inflation fears have put a damper on the market. Even though some price increases are a good sign for the economic recovery, investors worry that sudden spikes from the reopening could force the Federal Reserve to change its ultra-loose monetary policy stance. And higher interest rates would be bad for stocks.
Wednesday’s consumer price inflation figures seemed to add fuel to the fire, showing a larger-than-expected jump in prices for April. But as of Thursday morning all of that seems forgotten and the market is back in the green.
That said, the inflation story hasn’t really changed. In fact, Thursday morning’s producer price inflation numbers followed in the CPI’s footsteps and also exceeded expectations. The PPI rose 6.2% in the year ended April, the Bureau of Labor Statistics reported, the biggest increase since annual data was first calculated in November 2010.
“Higher inflation is likely to remain in the spotlight as the post-pandemic recovery accelerates,” said Mark Haefele, UBS Global Wealth Management’s chief investment officer.
Another reality of the post-pandemic world: market volatility.
But that’s not a bad thing, according to Haefele, because a selloff can be an opportunity to snap up quality stocks on the cheap. Whoever did that earlier this week has reaped the benefits of it today.
