The retail sector ripped huge gains after the CPI report on Thursday showed the long-awaited moderation in inflation.
Investors may be betting that the inflation rate has turned the corner and the Fed's terminal rate could be in sight sometime in 2023.
"We have learned over the past 18 months or so that one good core CPI print proves nothing, but we see good reasons to think this one is the real deal, given the downward pressure in the pipeline," noted Pantheon Macro's Ian Shepherdson. "We expect another decent core print in November - the data are published a couple of days before the December FOMC meeting - giving the Fed scope to hike by only 25bp, provided the employment/wages numbers are on the soft side too," he added.
That could all add to some clarity on when consumers may seem some relief on pricing at stores.
Mall stocks like Boot Barn ( NYSE: BOOT ) +11.89% , American Eagle Outfitters ( AEO ) +10.85% , Abercrombie & Fitch ( ANF ) +9.72% , Lululemon Athletica ( LULU ) +9.03% . Dillard's ( DDS ) +8.95% , Macy's ( M ) +8.05% , and Nordstrom ( JWN ) +7.33% were big gainers.
Casino stocks also rallied with Caesars Entertainment ( CZR ) +11.45% , Penn National Gaming ( PENN ) +6.85% , and MGM Resorts ( MGM ) +6.38% shedding some of the recession risk that had been applied to shares.
Peloton Interactive ( PTON ) also caught some bids on hopes for better sales and moved up 14.73% .
As for the biggest retailers , Target ( TGT ) jumped 5.77% , while Costco ( COST ) rose 2.90% . Walmart ( WMT ) was only up 1.65% with the retail giant viewed as a more defensive play. Best Buy ( NYSE: BBY ) ripped a 8.07% gain and Dick's Sporting Goods ( DKS ) soared 9.20% .
Of course, the better-than-anticipated print arrived near the start of the holiday shopping season, although it's unlikely to shift consumer spending trends in the near term with the year-over-year level of inflation still elevated.
Read more about the October CPI report.
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Retail stocks are soaring because inflation may have peaked