The stock market experienced a significant boost following the release of the latest inflation report. This rally is not expected to fade away quickly – it is one to believe in.
Impressive Gains in U.S. Stock Indexes
On Tuesday morning, all three major U.S. stock indexes witnessed jumps of over 1%, with the Nasdaq Composite coming close to a 2% gain.
A Moderation in Inflation
The latest data revealed that the consumer price index rose by 3.2% year over year in October. Although slightly lower than economists’ expectations, this figure still reflects a moderation compared to September’s 3.7% rise. Achieving the Federal Reserve’s target of 2% inflation seems plausible now. These numbers solidify the expectation that the central bank will maintain steady interest rates instead of implementing further increases to cool the economy. Additionally, there is even speculation that the Fed might consider cutting rates within the next year, making stocks an even more appealing investment.
Encouraging Signs for the S&P 500
At just under 4500, the S&P 500 has breached several key levels, indicating positive momentum. Earlier in the year, sellers repeatedly forced the index lower when it touched the so-called “resistance level” around 4400. Their concerns were primarily driven by rising interest rates and their potential impact on the economy. However, Tuesday’s gains suggest that these concerns are subsiding.
Looking Ahead: Holding Strong at the Current Level
While it remains to be seen whether the index can sustain its position around 4500, it is essential to monitor if sellers will emerge to push it lower once again. As of now, the S&P 500 is holding strong below the 4500 mark.
Potential for Further Gains
The sudden surge of buyers indicates the likelihood of more gains in the future. If the S&P 500 can maintain its current level for a few days, there is a possibility that momentum will carry it above its 2023 intraday high of 4607, which was reached in July.
According to Frank Cappelleri from Cappthesis, the upside target is near 4,675, as long as the SPX remains above the 4,390-breakout zone.
A Potential Gain of 5%
If the S&P 500 manages to reach this substantial level, it would translate to a gain of approximately 5% from its current position.
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