Nasdaq and S&P 500 add to rally, stoked by inflation optimism

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By Noel Randewich and Sruthi Shankar

© Thomson Reuters FILE PHOTO: Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in New York

(Reuters) – The S&P 500 and Nasdaq rose on Friday, extending a rally started the day before after a soft inflation reading raised hopes the Federal Reserve would get less aggressive with U.S. interest rate hikes.

© Thomson Reuters Traders work on the floor of the NYSE in New York

Amazon jumped 4.5%, with Apple and Microsoft up more than 1% each and contributing to the Nasdaq’s strong gain.

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On Thursday, the S&P 500 and the Nasdaq racked up their biggest daily percentage gains in more than 2-1/2 years as annual inflation slipped below 8% for the first time in eight months.

Declines in healthcare stocks weighed on the Dow Jones Industrial Average, with UnitedHealth Group losing more than 5%.

The S&P 500 growth index, which includes interest rate-sensitive technology stocks, rose 1.4%, while the value index was mostly unchanged.

“What we’re really seeing today is simply a follow-through on yesterday. There’s a lot of cash sitting on the sidelines that is being put to work,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“Perhaps it signals some type of bottom being put in the market, some type of line drawn in the sand. But even if we put in a bottom, we’re a long way away from setting new highs,” Ghriskey said.

Of the 11 S&P 500 sector indexes, seven rose, led by energy, up 2.84%, followed by a 2.48% gain in communication services.

Investors see a 81% chance of a 50-basis point rate hike in December and a 19% chance of a 75-basis point hike, according to CME Fedwatch tool.

Adding some nervousness on Wall Street, crypto exchange FTX said it would start U.S. bankruptcy proceedings and that CEO Sam Bankman-Fried resigned due to a liquidity crisis that prompted intervention from regulators around the world.

In afternoon trading, the S&P 500 was up 0.82% at 3,988.77 points.

The Nasdaq gained 1.84% to 11,318.39 points, while the Dow Jones Industrial Average was down 0.15% at 33,664.89 points.

The S&P 500 has gained over 6% in the past two sessions, while the Nasdaq has added about 9%.

Worries about an economic downturn have hammered Wall Street this year. The S&P 500 remains down about 16% year to date, on course for its biggest annual decline since 2008.

U.S.-listed shares of Chinese companies rose, with Alibaba Group Holding Ltd gaining 1.9% after China eased some of its strict COVID-19 rules.

Advancing issues outnumbered falling ones within the S&P 500 by a 1.6-to-one ratio.

The S&P 500 posted 22 new highs and no new lows; the Nasdaq recorded 84 new highs and 90 new lows.

(Reporting by Shubham Batra, Sruthi Shankar, Devik Jain, Bansari Mayur Kamdar and Shashwat Chauhan in Bengaluru, and by Noel Randewich in Oakland, California; Editing by Shounak Dasgupta, Arun Koyyur and David Gregorio)

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