Dow Rebounds 700 Points as Triple Witching Fuels Volatility; Inflation Optimism Lifts Tesla

Dow Jumps 700 Points on Encouraging Inflation Data as Investors Eye Triple Witching

The Dow Jones Industrial Average is staging a strong recovery on Friday, rebounding from a turbulent week of steep losses. Cooler-than-expected inflation data is fueling optimism among traders as markets approach the closely watched “triple witching” event later in the session.

How Are Markets Performing?

As of 16:45 GMT, the Dow is up 719 points, or 1.7%, while the S&P 500 and Nasdaq Composite are gaining 1.6% and 1.7%, respectively. The rally follows November’s Personal Consumption Expenditures (PCE) price index report, showing a 2.4% year-over-year increase—slightly below economists’ expectations.

This positive inflation surprise has eased concerns over persistently high price pressures. Earlier this week, markets tumbled after the Federal Reserve announced plans to reduce interest rates more cautiously than anticipated, projecting two cuts in 2024 instead of four.

What Is Driving Today’s Rebound?

Tech stocks like Nvidia and Tesla, which struggled earlier in the day, are helping lead the recovery. Tesla is now up approximately 1%, while Nvidia has gained 2%.

Comments from Chicago Fed President Austan Goolsbee have also bolstered market sentiment. Goolsbee suggested that inflation remains on track to reach the Fed’s 2% target, calling the latest data a sign that recent inflation “firming” might have been temporary.

Goolsbee’s remarks helped erase early losses, with the Dow reversing a 195-point decline to climb as much as 377 points during the session.

What Challenges Persist?

Despite today’s rally, markets remain on track for weekly losses. The Dow is heading for a 2.7% decline, its worst weekly performance since September, while the S&P 500 and Nasdaq are both down about 2% for the week.

Adding to uncertainty, a Republican-backed government funding bill failed in the House on Thursday night, raising the risk of a partial government shutdown starting at midnight. Although this has not significantly impacted Friday’s trading, fiscal uncertainty could weigh on sentiment in the coming days.

Additionally, Cleveland Fed President Beth Hammack’s dissent against this week’s rate cut underscores lingering inflation risks. Hammack warned that uneven progress in reducing inflation could de-anchor expectations and complicate efforts to return to the Fed’s 2% target.

What to Expect as Triple Witching Nears?

Investors are bracing for potential volatility heading into the “triple witching” event, which occurs as stock index futures, stock index options, and single-stock options expire simultaneously. With $6.6 trillion in options set to expire, significant price swings could occur before markets close.

While today’s rally suggests diminished short-term downside risk, uncertainty around fiscal policy, inflation, and the Fed’s outlook could temper gains. Traders should remain cautious but optimistic, with a neutral-to-mildly bullish tone likely to dominate as the session concludes.