NASDAQ-Adv: 3,293 Dec: 1,291 NYSE-Adv: 3,090 Dec: 1,007 (Source: Nasdaq)
US stock indices rose the most in about a month as bond yields fell, with investors shaking off Wednesday’s aggressive comments by Federal Reserve officials.
The last time the Nasdaq Composite (.IXIC), S&P 500 (.SPX) and the Dow Jones Industrial Average (.DJI) made a higher one-day percentage jump was on Aug. 10, although investors doubt this is a long-term trend.
The tech-heavy Nasdaq led gains in major indices, making a seven-session loss streak.
US stocks have sold off strongly since mid-August after Fed Chair Jerome Powell’s aggressive comments were compounded by signs of an economic slowdown in Europe and China and aggressive moves by major central banks to tame inflation.
The strength of data signaling in the US economy has led traders to bet on a 75 basis point rate hike by the Fed later this month. Fed fund futures implied that investors estimated a greater than 76% chance of such a move.
Ten-year Treasury yields fell from a three-month high reached earlier in the session, pushing the shares of price-sensitive stocks such as Tesla Inc (TSLA.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN). .o).
High-growth companies, such as those in the tech sector, usually benefit when returns fall, as this means a lower discount rate on their future earnings when investors calculate valuations.
Still, investors are looking for more outward signs of how the Federal Reserve’s rate hikes will unfold to contain rising inflation ahead of its next meeting later this month.
“The bond markets are behaving a little bit better today, which makes the stock market feel a little bit better, but the big concerns are still what the Fed is going to do on September 21. So we see a back and forth tug-of-war every day,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company.
The stock’s performance also ignored aggressive comments from the Federal Reserve earlier on Wednesday. Loretta Mester, president of the Cleveland Federal Reserve Bank, said the high cost of rental housing in the US has not yet fully sunk into inflationary measures, suggesting inflation could rise further.
Meanwhile, Richmond Fed president Thomas Barkin said the U.S. central bank should raise interest rates to levels that constrain economic activity and keep them there until policymakers are “convinced” that inflation is declining. while Federal Reserve Vice-Chairman Lael Brainard added that monetary policy will have to be restrictive “for a while.”
The main focus will be on Powell’s speech on Thursday and on US consumer price data next week for clues on the path of monetary policy.
The Fed’s Beige Book, a periodic snapshot of the health of the US economy, indicates that price pressures are expected to last at least through the end of the year.
The Dow Jones Industrial Average (.DJI) rose 435.98 points or 1.4% to 31,581.28, the S&P 500 (.SPX) gained 71.68 points or 1.83% to 3,979.87 and the Nasdaq Composite (.IXIC) added 246.99 points, or 2.14% to 11,791.90.
Ten of the 11 major S&P sectors were higher, led by a jump in utilities (.SPLRCU), reflecting the defensive positioning of investors amid economic uncertainties.
The energy index (.SPNY) fell 1.16% as oil prices fell about 5% on demand concerns related to looming recession risks. Brent oil fell below $90 a barrel.
Nio Inc reversed previous losses and ended the session 2.16% after the Chinese electric vehicle maker reported a larger adjusted net loss for the second quarter, but sales exceeded expectations.
Coupa Software Inc (COUP.O) rose nearly 18% after the payment management software company beat second-quarter revenue and earnings estimates.
Volume on US exchanges was 10.21 billion shares, compared to the full session average of 10.43 billion over the past 20 trading days.
The number of emerging issues surpassed the declining one on the NYSE by a ratio of 3.07 to 1; on Nasdaq, a ratio of 2.60 to 1 favored the more advanced.
The S&P 500 posted 6 new 52-week highs and 16 new lows; the Nasdaq Composite recorded 24 new highs and 231 new lows.
Source: Reuters (reporting by Carolina Mandl, in New York, with additional reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; editing by Anil D’Silva, Maju Samuel, Shounak Dasgupta, and Aurora Ellis)