NEW YORK, RAW – Wall Street rallied to close sharply higher, powered by a recovery in interest-sensitive growth stocks as investors digested hot inflation data and a mixed bag of quarterly results.

Autumning US Treasury yields helped the tech-heavy Nasdaq lead all three major US stock indexes higher, with semiconductors outperforming the broader market.

The Nasdaq jumped over two per cent while the S&P 500 and the Dow gained more than one per cent.

“Bond yields may have gotten ahead of themselves and they’re dropping lower today,” said David Carter, managing director at Wealthspire Advisors in New York. “This helps almost all equities, but particularly growthy areas like tech.”

JPMorgan Chase & Co set the first-quarter earnings season off to an inauspicious start, reporting a 42 per cent drop in quarterly profit. The downbeat results from the biggest US lender sent its shares down 3.2 per cent.

 

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On the brighter side, Delta Air Lines’ results beat expectations and it forecast a current-quarter return to profit due to “historically high” demand. Its 6.2 per cent share jump was contagious; the broader S&P 1500 airline index surged 6.8 per cent.

“It’s great that demand is so strong,” Carter added. “However, drive inflation higher, which will force the Fed to continue to raise rates, resulting in a weaker stock market.”

“Business is good. Almost too good.”

Strong demand also drove the Labor Department’s producer price index to a blistering 11.2 per cent year-on-year growth rate, the hottest annual reading since the Labor Department started tracking annual data in 2010.

Core PPI and other major indicators have risen beyond the Federal Reserve’s average annual 2 per cent inflation target.

Minutes from the most recent Fed policy meeting and subsequent remarks from its members have market participants setting easy odds for a series of 50-basis-point interest rate hikes in the coming months, as the central bank treads the delicate tightrope of curbing inflation without provoking a recession.

“It’s obvious now that the Fed is singing off the same song sheet, more tightening is coming,” Carter said. “Much of this, however, is priced in and expected.”

The Dow Jones Industrial Average rose 344.23 points, or 1.01 per cent, to 34,564.59, the S&P 500 gained 49.14 points, or 1.12 per cent, to 4,446.59 and the Nasdaq Composite added 272.02 points, or 2.03 per cent, to 13,643.59.

Among the 11 major sectors of the S&P 500, consumer discretionary stocks enjoyed the largest percentage gains, jumping 2.5 per cent.

Analyst estimates for the corporate earnings season have grown less optimistic. Aggregate annual S&P 500 earnings growth for the first three quarters of 2022 is estimated at 5.4 per cent as of Wednesday, down from 7.5 per cent at the beginning of the year.

On Thursday, the holiday-shortened week will end with results from a swath of big banks, including Morgan Stanley , Citigroup Inc, Goldman Sachs Group Inc, and Wells Fargo & Co.

Advancing issues outnumbered declining ones on the NYSE by a 2.92-to-1 ratio; on Nasdaq, a 2.87-to-1 ratio favoured advancers.

The S&P 500 posted 19 new 52-week highs and 11 new lows; the Nasdaq Composite recorded 48 new highs and 168 new lows.

Volume on US exchanges was 10.52 billion shares, compared with the 12.33 billion average over the last 20 trading days.