S&P 500, Nasdaq extend gains on Fed slowdown bets

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  • Crypto stocks slide as FTX to start U.S. bankruptcy proceedings
  • Indexes: Dow off 0.42%, S&P up 0.40%, Nasdaq adds 1.18%

Nov 11 (Reuters) – The S&P 500 and the Nasdaq rose on Friday, extending a rally that was triggered by the expectations of smaller interest rate hikes by the Federal Reserve following soft inflation data.

Trading was volatile at the open following news that crypto exchange FTX would start U.S. bankruptcy proceedings and that its CEO, Sam Bankman-Fried, resigned due to a liquidity crisis at the company that prompted intervention from regulators around the world.

“The bankruptcy filing happened right before the open so that actually knocked the entire stock market down too,” said Dennis Dick, market structure analyst and trader at Triple D Trading.

“There was a lot of bad news already priced in. You would think these stocks would be down significantly on this news but many have actually come off the loss significantly.”

The S&P 500 and the Nasdaq racked up their biggest daily percentage gains in over 2-1/2 years on Thursday after data showed annual inflation below 8% for the first time in eight months.

Futures contracts tied to the Fed’s benchmark rate show traders now expect the blistering pace of policy tightening to slow next month and stop sooner than expected, as well as for the U.S. central bank to cut rates in the second half of 2023.

Investors see a 71.5% chance of a 50-basis point rate hike in December, while the top policy rate is seen in the 4.75-5% range next May, lower than the 5% plus range seen before the inflation data.

“Yesterday is a good example of how much built-up sentiment there is to push the market higher. It is like a coiled spring and investors are looking for any positive sign to buy this market,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

The S&P 500 has now rallied over 10% from its mid-October closing lows, while the Nasdaq has climbed nearly 8%, aided by better-than-expected earnings reports and hopes of a Fed slowdown.

The Dow (.DJI) is now down just 8.8% from its record closing high hit earlier this year.

However, all the three indexes are down sharply on a year-to-date basis, on course for their worst annual performance since 2008, on fears that surging inflation and rising interest rates will dent corporate profits.

U.S. consumer sentiment fell in November, pulled down by persistent worries about inflation and higher borrowing costs, a survey by the University of Michigan showed.

At 10:39 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 142.67 points, or 0.42%, at 33,572.70, the S&P 500 (.SPX) was up 15.89 points, or 0.40%, at 3,972.26, and the Nasdaq Composite (.IXIC) was up 130.60 points, or 1.18%, at 11,244.75.

Cryptocurrency and blockchain-related companies tumbled, with shares of Silvergate Capital (SI.N) dropping 8.7%

Shares of megacap companies extended gains from the previous session, with Tesla Inc (TSLA.O) up 0.6% and Amazon.com (AMZN.O) gaining 3.4%.

U.S.-listed shares of Chinese companies rose, with Alibaba Group Holding Ltd gaining 1.7% as China eased some of its strict COVID-19 rules.

Meanwhile, the U.S. Treasury market was closed for Veterans Day.

Advancing issues outnumbered decliners by a 3.05-to-1 ratio on the NYSE and by a 2.49-to-1 ratio on the Nasdaq.

The S&P index recorded 18 new 52-week highs and no new lows, while the Nasdaq recorded 76 new highs and 62 new lows.

Reporting by Shubham Batra, Sruthi Shankar, Devik Jain and Bansari Mayur Kamdar in Bengaluru; Editing by Shounak Dasgupta

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