By Yasin Ebrahim
Investing.com -- The Dow racked up gains Wednesday, as data pointing to signs of easing inflation stoked bets on less aggressive Federal Reserve rate hikes and sent U.S. Treasury yields tumbling pushing growth sectors of the market including tech sharply higher.
The Dow Jones Industrial Average gained 1.6%, or 535 points, the Nasdaq was up 2.9%, the S&P 500 rose 2.1%.
The U.S. consumer price index, a measure of inflation, was flat in June compared with expectations for a 0.2% rise. In the 12 months through July, headline inflation eased to 8.5% from 9.1% in June but was still the highest since 1981.
The data suggested that inflation has “passed its peak,” Commerzbank said, as the “collapse in the price of gasoline played a decisive role.”
Others, however, believe that inflation may still surprise to the upside in the coming months as oil prices are yet to peak.
"I wouldn't be in that camp that thinks we're at peak inflation," Sean O'Hara, president of Pacer ETFs, told Investing.com in an interview on Wednesday. "We haven't fixed the supply chain problem and I don't think we've seen peak oil for this year yet."
U.S. Treasury yields slumped as investors bet on a less hawkish Fed, with the 2-year Treasury yield, which is sensitive to fed rate hikes, slipping more than 2%.
Tech stocks, which have had a rocky start to the week following pressure from falling chip stocks this week, were aided by falling Treasury yields, which make valuations on growth stocks like tech more attractive.
Google-parent Alphabet (NASDAQ:GOOGL), and Meta (NASDAQ:META), led the gains for big tech, while Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT) were up more than 2% each.
Twitter (NYSE:TWTR), meanwhile, gained more than 3% on bets that the social media giant may win its legal battle with Tesla (NASDAQ:TSLA) chief executive Elon Musk to force the billionaire to complete his $44 billion deal to buy the company.
The Tesla CEO sold nearly $7 billion in Tesla shares over the past few days, to “avoid an emergency sale of Tesla stock” should Twitter force the deal to close, Musk said.
“[T]he chances of a Twitter deal now more likely,” Wedbush analyst Daniel Ives said, and raised the price target on Twitter to $50 from $30, reflecting the “higher chances the deal now ultimately closes.”
Financials, mostly banks, were also in ascendency as the Treasury yield curve steepened, though remained inverted pointing to ongoing fears of a recession, albeit a milder downturn somewhat, following the latest inflation data and strong jobs report last week.
The 2-year Treasury yield over 10-year yield steepened to negative 40 basis points following a dip to lower than negative 50 basis intraday.
Signature Bank (NASDAQ:SBNY), Synchrony Financial (NYSE:SYF), and SVB Financial Group (NASDAQ:SIVB) were among the biggest gainers, with the latter up more than 7%.
Energy stocks turned positive as oil prices rebounded from session lows despite data showing U.S. weekly inventories jumped by a more-than-expected 5.5 million barrels last week.
In earnings news, Coinbase Global (NASDAQ:COIN) climbed 7% as the crypto exchange operator's wider-than-expected loss was overshadowed by a jump in bitcoin.