Stocks Climbed Amid Optimistic October Inflation Report

U.S. stocks posted its biggest daily gain since 2020 following data on October’s consumer price inflation (CPI), which came in cooler-than-expected. The data seemed to curb expectations regarding how aggressive the Fed could remain with its monetary policy tightening. Treasury yields and the U.S. dollar tumbled to provide fuel for the stock rally, while crude oil and gold prices traded higher amid the decisive moves in the bond and currency markets. The inflation report overshadowed the ongoing turmoil in the cryptocurrency markets as crypto exchange teeters on the brink of collapse. Earnings results continue to pour in, as Wynn Resorts and Rivian Automotive both posted losses, but both offered some upbeat guidance. In other economic news, jobless claims came in higher than expected for last week. Asian stocks finished lower as the global markets await the undetermined U.S. midterm elections, and European stocks ended decisively higher in the wake of the U.S. inflation data.

The Dow Jones Industrial Average jumped 1,201 points (3.7%) to 33,715, the S&P 500 Index soared 208 points (5.5%) to 3,956, and the Nasdaq Composite skyrocketed 761 points (7.4%) to 11,114. In heavy volume, 5.7 billion shares of NYSE-listed stocks were traded, and 6.3 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.64 to $86.47 per barrel. Elsewhere, the gold spot price increased $44.00 to $1,757.70 per ounce, and the Dollar Index plummeted 2.5% to 108.04.

Wynn Resorts Limited (WYNN $72) reported an adjusted Q3 loss of $1.20 per share, compared to the $1.14 per share shortfall that FactSet had estimated, with revenues declining 10.5% year-over-year (y/y) to $890 million, above the Street's forecast of $871 million. The company noted strength in its Las Vegas and Boston businesses, but said in Macau, COVID-related travel restrictions continued to negatively impact its results. However, WYNN said it is pleased to experience encouraging pockets of demand in Macau during the recent October holiday period and it remains confident that the market will benefit from the return of visitation over time. Shares were nicely higher.

Rivian Automotive Inc. (RIVN $33) posted an adjusted loss of $1.57 per share, smaller than the $1.79 per share loss that was expected, on revenues of $536 million which came in south of the forecasted $550 million. The electric vehicle company reaffirmed its 2022 production guidance of 25,000 total units, while noting that the in-transit time from rail shipments coupled with an increase in volumes from a ramp up towards the end of the quarter will cause a larger discrepancy between production and deliveries. Shares rose over 15%.

Stocks rallied in the wake of a favorable consumer price inflation report, overtaking last week's solid drawdown, while Q3 earnings season heads down the home stretch. Of the 461 S&P 500 companies that have reported results thus far, about 58% have topped revenue expectations and roughly 69% have bested profit projections, per data compiled by Bloomberg. Compared to last year, revenues are 12.2% higher and earnings growth is on track to be up 3.9%.

Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her latest article, Disappearing Act: Earnings, how earnings weakness is starting to materialize across a broader swath of industries, with hits coming from a strong dollar, weaker demand, and aggressive monetary policy.