Stocks on the Move: Inflation Drop Lifts Markets

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The markets were surging on Tuesday, fueled by the October Consumer Price Index (CPI) report that saw the inflation rate drop to 3.2% last month. That is down sharply from the September reading of 3.7% and slightly better than the 3.3% rate analysts had projected.

Core CPI, which excludes energy and food prices, was also better than anticipated at 4%, down from 4.1% a month ago. The consensus target for core CPI in October was 4.1%.

These numbers buoyed the markets, raising hopes that the lower inflation numbers would effectively put an end to any more rate hikes in this cycle. As of Tuesday’s closing bell, the S&P 500 was up 84 points (1.9%), while the Dow Jones Industrial Average gained 490 points (1.4%), and the Nasdaq Composite climbed a whopping 327 points (2.4%).

However, small caps were the biggest beneficiaries, as the Russell 2000 Index surged 91 points (5.3%) on Tuesday.

Hydrogen fuel-cell stocks bounce back

The gains were across the board on Tuesday, but some of the biggest movers were in the energy sector. More specifically, hydrogen fuel-cell companies soared on Tuesday, led by Plug Power (NASDAQ:PLUG), which was up by about 20% to just over $4 per share.  

This was a bounce back for Plug Power from its selloff on Friday, when it dropped some 40% after posting third-quarter earnings that fell far short of expectations amid “unprecedented supply challenges in the hydrogen network in North America.”

In the fine print of the earnings report, Plug Power included a cautionary note containing some red flags that spooked investors, including comments about its ability to continue “as a going concern” and its “need to raise additional capital to fund our operations, and such capital may not be available to us.” In an interview later with Yahoo! Finance, CEO Andy Marsh said he was confident that the company could manage through these challenges.

Tuesday’s rally indicates that the panic selling on Friday may have been overdone. It also lifted other hydrogen fuel-cell stocks on Tuesday, including Bloom Energy (NYSE:BE), which was up 17% to about $12.40 per share, Fuelcell Energy (NASDAQ:FCEL), which surged 18% to about $1.24 per share, and Ballard Power Systems (NASDAQ:BLDP), which jumped 11% to $3.63 per share.

Financials also soared on Tuesday

Financial stocks, particularly banks and fintechs, also moved higher on Tuesday, buoyed by the likelihood of no more rate hikes. An end to rate hikes would suggest a soft landing without a recession, and that is certainly good news for banks and the fintechs that serve them.

Among the top-performing banks on Tuesday were Axos Financial (NYSE:AX), which climbed 16% to about $38.75, while Key Corp (NYSE:KEY) was up 10% to roughly $12 per share. Among the top fintechs were Upstart (NASDAQ:UPST), which gained 17% Tuesday to roughly $25.50 per share, and buy-now-pay-later stock Affirm (NASDAQ:AFRM), which surged nearly 12% to over $25 per share.

Other notable gainers in the financial sector were Rocket Mortgage (NYSE:RKT), up 16% to about $9.30 per share, pet insurer Trupanion (NASDAQ:TRUP), up 11% to over $25 per share, and regional bank Western Alliance Bancorp (NYSE:WAL), which jumped 10.5% to roughly $48 per share.

Among the small cap winners, Lindblad Expeditions (NASDAQ:LIND) cruised higher on Tuesday, jumping nearly 17% on the day to over $7 per share.