Dow jumps 400 points, Nasdaq surges 2% as investors cheer

The S&P 500’s surge Wednesday took it to levels not seen since early May as the comeback rally reaches new heights. The benchmark is now up 15% from its mid-June low as investors bet inflation is peaking and the Federal Reserve will eventually slow its intensity of rate hikes.

After tumbling into a bear market, the S&P 500 has now cut its losses for 2022 to 12%. The index is 13% off its all-time high reached in January.

The Dow opened higher by more than 400 points, while the Nasdaq Composite jumped more than 2%.

The rally is broad, with only energy stocks struggling.

-Jesse Pound

Treasury yields dropped on Wednesday as a highly anticipated inflation figure came in flat compared with the previous month.

The yield on the benchmark 10-year Treasury note tumbled 9 basis points to 2.67%, hitting the lowest level in a week. The yield on the 30-year Treasury bond fell 6 basis points to 2.96%.

The inflation report suggested to some that price pressures might have peaked, which could spark speculations that the Federal Reserve could conduct a smaller interest-rate hike next month.

“Overall, incremental confirmation that the Fed’s efforts to combat consumer price increases have been successful,” Ian Lyngen, BMO’s head of U.S. rates, said in a note. “The combination of NFP and CPI for July leave the 75 bp vs. 50 bp Sept hike debate alive and well.”

— Yun Li

Wednesday’s July CPI report, which showed price increases slow, is a sign that the economy has hit peak inflation, according to Jim Cramer.

“We obviously had peak inflation,” he told CNBC’s “Squawk Box” on Wednesday, noting that energy, travel and prices at the pump have continued to come down.

Cramer added that the recent hike from the Federal Reserve is likely the central bank’s best attempt to get surging prices under control.

Moving ahead, Cramer expects the central bank to hike rates again come September but likely by 50 basis points compared to the long-anticipated 75 basis point move.

“I think what matters here is that these are the numbers that Powell wanted,” he said.

— Samantha Subin

The CPI report showing slowing inflation gave investors the green light to buy technology shares beaten-up this year on concern over the impact of rising interest rates on growth companies.

Tesla was higher by 4% in premarket trading. Amazon and Meta gained 3%.

Even chip stocks, besieged by negative earnings warnings in the sector this week, were rebounding in early trading. Nvidia and AMD were up more than 3% apiece.

—John Melloy

Good news in the CPI report appears to have lowered the market odds of a three-quarters-of-a-percentage-point Fed hike in September, but some still believe the central bank will remain aggressive.

“I still think the Federal Reserve is on for 75 basis points….They need…