Wall Street Today | PPI Shows Largest Price Drop in Three Years

U.S. stocks rose Wednesday after a big day of gains sparked by low CPI data bolstered hopes for a soft landing.

"Inflation -- for now -- is coming back down, and the economy -- for now -- continues to grow at a robust pace, so the only logical direction for stocks is higher," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, told MarketWatch.

"The widely forecast 2023 recession never materialized, and although each year we escape recession brings us one year closer to the next one, forecasters should be humbled and have a lower conviction for their 2024 recession calls," he said.

The producer price index for final demand declined 0.5% last month, the largest decrease since April 2020, the Labor Department's Bureau of Labor Statistics said on Wednesday. Data for September was revised lower to show the PPI increasing 0.4% instead of 0.5% as previously reported.

Economists polled by Reuters had forecast the PPI edging up 0.1%. In the 12 months through October, the PPI increased 1.3% after 2.2% in September. Cooling inflation and slowing job and wage growth reinforced expectations that the U.S. central bank's fastest monetary policy tightening campaign since the 1980s was over.

Goods prices dropped 1.4% in October, with a 15.3 plunge in gasoline prices accounting for more than 80% of the decline. Goods prices rose 0.8% in September. Food prices fell 0.2%.

Retailers' sales fell 0.1% in October and dropped for the first time in seven months, but the decline is unlikely to last as the U.S. enters the holiday shopping season. Excluding car sales, sales rose by 0.1%, compared to an expectation of a drop of 0.2% expected.

Economists polled by The Wall Street Journal had forecast a 0.2% drop in sales. It was the first negative reading since March, the government reported. Retail sales represent about one-third of all consumer spending and usually offer clues on the economy's strength.

Oil fell after a government report showed swelling US crude inventories, and a Federal Reserve official signaled interest rates may remain elevated. US oil stockpiles rose 17.5 million in the last two weeks, the Energy Information Administration report on Wednesday showed. Crude extended declines after the Fed’s Mary Daly told the Financial Times that it’s too early to tell whether rate hikes have beaten inflation.

A jump in 10-year Treasury yields implies that rates will remain elevated, slowing the economy and hurting consumer spending, said Robert Yawger, director of the energy futures division at Mizuho Securities USA. West Texas Intermediate fell 2% to settle below $77 a barrel on Wednesday.