Wall Street is buzzing with excitement after the Department of Labor’s October Consumer Price Index (CPI) report was released. The CPI report showed that prices in the United States had surged 0.5% in October, which is considered to be the sharpest month-over-month growth since the start of the COVID-19 pandemic. The news drove stocks and bonds to their highest levels in the past few months.
The increase in prices was driven primarily by a jump in energy and transportation costs, as well as rising clothing, shelter, and medical care expenses. This increase in prices is an indication that the economy is recovering from the pandemic. While any increase in prices is usually considered bad news for consumers, investors were thrilled to see the CPI numbers, as they indicate an increase in consumer spending.
The New York Stock Exchange (NYSE) saw the Dow Jones Industrial Average, theNASDAQ Composite, and the S&P 500 all rise to records on the news. The Dow Jones Industrial Average was up 1.2% while the NASDAQ Composite and S&P 500 were both up 0.9%.
Bond markets also saw investors flock to safe-haven assets. The US Treasury yield fell to a record low of 0.747%, with investors eagerly scooping up bonds in order to protect their portfolios from economic uncertainty.
The CPI report provides a welcome boost to investors who were uncertain of the economic outlook. The surge in the equity markets has also been boosted by positive news on the potential development of coronavirus vaccines.
Despite the positive news, economists caution that the gains may not last. The rise in prices was largely driven by increases in energy and transportation, which are given added impetus by people returning to work after the pandemic-imposed lockdowns. It is expected that these prices will soon begin to level off.
It remains to be seen how long the current surge in stocks and bonds will last. However, the fact that the latest CPI report showed an increase in prices is a positive sign for the economy, and it is a welcome relief for investors who have had to endure a roller-coaster year in the markets.