Wall Street holds steady, hanging on to big weekly gains

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Wall Street pointed higher in premarket trading Friday, adding to the hefty gains from a day earlier when government data showed that U.S. inflation eased more expected, spurring hopes the Federal Reserve might scale down plans for more interest rate hikes.

Futures for the Dow Jones Industrial average rose 0.5%. Futures for the S&P 500 also gained 0.5% following Thursday’s biggest single day gain for the benchmark in 2 1/2 years.

On Thursday, the government reported consumer prices rose 7.7% over a year ago in October, lower than the 8% expected by economists and the fourth straight monthly decline.

The announcement “drove a ‘more dovish’ calibration of interest rate expectations,” Yeap Jun Rong of IG said in a report.

The Fed and central banks in Europe and Asia are raising rates to cool inflation that is at multi-decade highs. Investors worry that might tip the global economy into recession. They hope lower inflation might prompt the Fed to ease off plans for more increases.

Forecasters warned Thursday it was too early to be certain that prices are under control. Fed officials have said rates might have to stay elevated for some time.

In Europe at midday, the FTSE 100 in London gained slipped 0.4%, the DAX in Frankfurt added 0.4% and the CAC 40 in Paris was 0.5% higher, but declining from earlier gains of more than 1%.

In Asia, Hong Kong’s Hang Seng index soared 7.7% to 17,325.66 and the Nikkei 225 in Tokyo gained 3% to 28,263.57.

The Shanghai Composite Index added 1.7% to 3,078.29 after the ruling Communist Party promised shorter quarantines for travelers arriving in China and other changes to anti-virus tactics to reduce the cost of a severe “zero-COVID” strategy that has disrupted the economy.

The Kospi in Seoul rose 3.4% to 2,483.16 and Sydney’s S&P-ASX 200 was up 2.8% at 7,158.00.

India’s Sensex gained 1.8% to 61,674.31. New Zealand and Southeast Asian markets advanced.

Thursday’s U.S. inflation data reassured investors that inflation there was declining from its June peak of 9.1%, though forecasters said the Fed’s campaign to cool price rises was far from over.

Traders expect the Fed to raise its benchmark lending rate in December but by a smaller margin of half a percentage point following four increases of 0.75 percentage points, triple its usual margin. That benchmark stands at a range of 3.75% to 4%, up from close to zero in March.

The Fed is trying to slow economic activity to reduce pressure for prices to rise.

The latest figures are a sign the Fed is “on the right path,” but it will face “a lot of variables” over the next few quarters, Edward Moya of Oanda said in a report. He said the benchmark rate could be raised to 5% and “if inflation proves to be stickier, it could be as high as 5.50%.”

Core inflation, which strips out volatile food and energy prices and is more closely watched by the Fed, was 6.3% over a year earlier, down from September’s 6.6% and below the consensus forecast of 6.5%. Core prices rose 0.3% month on month, half of September’s 0.6% gain.

The yield on the 10-year Treasury, which helps set rates for mortgages and other loans, fell to 3.82% on Thursday from 4.15%. The two-year yield, which more closely follows expectations for Fed action, fell to 4.32% from 4.62% and was on pace for its sharpest fall since 2008.

Bond markets are closed Friday for the Veterans Day holiday.

In energy markets, benchmark U.S. crude gained $2.76 to $89.23 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 64 cents to $86.47 on Thursday. Brent crude, the price basis for international oil trading, advanced $2.68 to $96.35 per barrel in London. It rose $1.02 to $93.67 the previous session.

The dollar declined to 139.50 yen from Thursday’s 141.83 yen. The euro rose to $1.0308 from $1.0180.

On Thursday, the S&P 500 rose 5.5%, propelled by big gains for tech heavyweights. Amazon soared 12.2%, Apple rose 8.9% and Microsoft climbed 8.2%.

The Dow Jones Industrial Average gained 3.7%, or more than 1,200 points, to 33,715.37.

The Nasdaq composite, dominated by tech stocks, shot up 7.4% to 11,114.15 for its best day since March 2020, when Wall Street was rebounding from a crash at the start of the coronavirus pandemic.

McDonald reported from Beijing; Ott reported from Washington.