Wall Street turns around to trade higher, led by cyclical stocks

By Shreyashi Sanyal and Ankika Biswas

(Reuters) – Wall Street’s main indexes reversed course to trade higher by early afternoon on Thursday as stocks affected by macroeconomic changes gained, brushing aside rate-hike jitters after a surprise rise in inflation.

The Dow outperformed, while the and picked up from session lows, with analysts reckoning that the indexes possibly have hit the bottom as stocks languish deep in the bear market territory.

“There are no sellers left,” said Thomas Hayes, managing member at Great Hill Capital Llc in New York. “No question that we’re at or near (the bottom).”

Markets were sharply lower earlier in the day after headline consumer price index gained at an annual pace of 8.2% in September, compared with an estimated 8.1% rise.

Core CPI, which excludes volatile food and fuel prices, gained 6.6% last month, compared with the estimates of a 6.5% rise. The reading was much higher than a 6.3% rise in August.

The report follows data on Wednesday that showed U.S. producer prices increased more than expected in September.

Markets now price in a near 91% odds of a fourth straight 75-basis-point hike by the Fed at its meeting next month, with some also pricing in a 9% chance of a 100 bps rise. [FEDWATCH]

Cyclical parts of the market, including the S&P 500 financials, energy and materials sector indexes, rose between 2% and 3%.

Big Wall Street banks will kick-off third-quarter reporting season on Friday, with investors awaiting to see how a high interest-rate environment would affect their profit.

Analysts expect profit for S&P 500 companies to have risen just 4.1% from a year ago, much lower than an 11.1% increase expected at the start of July, according to Refinitiv data.

“We knew we were at an extreme inflection point and to see the market rally on bad news is actually really a sign of help because it just shows the selling has exhausted, the bad news is already known and now we’re going into earnings season with very low expectations,” said Hayes.

At 12:23 p.m. ET, the was up 526.53 points, or 1.80%, at 29,737.38, the S&P 500 was up 49.12 points, or 1.37%, at 3,626.15 and the Nasdaq Composite was up 87.00 points, or 0.84%, at 10,504.10.

Walgreens Boots Alliance (NASDAQ:) Inc rose 4.2% following better-than-estimated fourth-quarter results.

Delta Air Lines Inc (NYSE:) gained 3.9% after the carrier forecast a 9% rise in the fourth quarter from the same period in 2019, helped by robust domestic and international demand.

Advancing issues outnumbered decliners by a 1.38-to-1 ratio on the NYSE and by a 1.35-to-1 ratio on the Nasdaq. The S&P index recorded two new 52-week highs and 172 new lows, while the Nasdaq recorded 25 new highs and 567 new lows.

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