Wall Street is piling more gains onto its rally from the day before on hopes the Federal Reserve may finally be done with its market-crunching hikes to interest rates. The S&P 500 was 1.4% higher in midday trading Thursday and on track for a fourth straight winning day. It’s already up 4.4% this week and on pace for its best in nearly a year.
Quick Read
- Wall Street has seen a rally, with the S&P 500 up by 1.4% and potentially recording its best week in nearly a year.
- The Dow Jones Industrial Average rose by 365 points (1.1%), while the Nasdaq composite increased by 1.3%.
- The rally is fueled by hopes that the Federal Reserve may pause its aggressive interest rate hikes.
- The Fed kept its main interest rate unchanged at the latest meeting, breaking the sequence of previous rate increases aimed at combating inflation.
- Fed Chair Jerome Powell’s remarks led investors to believe that rising long-term Treasury yields might reduce the necessity for further rate hikes by the Fed.
- Yields on the 10-year Treasury fell to 4.67% from last week’s high of over 5%, easing financial market pressures.
- International markets also rallied in response, with significant stock index gains in South Korea, Japan, Germany, France, and London.
- Economic reports indicate increasing U.S. business productivity and a slight uptick in unemployment claims, both potentially easing inflation.
- Major U.S. companies reported better-than-expected profits, with notable stock rises for Eli Lilly and Starbucks following positive earnings reports.
- Cedar Fair and Six Flags announced a merger, affecting their stock performances positively.
- Moderna’s stock fell by 8.3% after reporting a larger loss than anticipated.
- Market anticipation is high for Apple’s upcoming quarterly report, which could significantly impact the market due to its value.
- The upcoming U.S. jobs report may indicate a hiring slowdown for October, a factor relevant to potential recession risks and inflation pressures.
The Associated press has the story:
Wall Street rallies toward its best week of 2023 on hopes for halt to rate hikes
Newslooks- NEW YORK (AP)
Wall Street is piling more gains onto its rally from the day before on hopes the Federal Reserve may finally be done with its market-crunching hikes to interest rates.
The S&P 500 was 1.4% higher in midday trading Thursday and on track for a fourth straight winning day. It’s already up 4.4% this week and on pace for its best in nearly a year.
The Dow Jones Industrial Average was up 365 points, or 1.1%, as of noon Eastern time, and the Nasdaq composite was 1.3% higher.
Stocks around the world rallied after the Federal Reserve late Wednesday opted against raising its main interest rate for a second straight meeting. It’s already jacked up rates furiously since early last year in hopes of slowing the economy and hurting financial markets enough to starve high inflation of its fuel.
More importantly for financial markets, investors also took comments by the Fed’s chair to mean that recent jumps in longer-term Treasury yields were acting like rate-hike substitutes and could obviate the need for more increases by the Fed.
Longer-term Treasury yields fell as Fed Chair Jerome Powell spoke following the central bank’s decision, and they kept sinking Thursday. The yield on the 10-year Treasury dropped to 4.67% from 4.74% late Wednesday and from more than 5% last week, when it reached its highest level since 2007.
Lower yields provide oxygen across financial markets. They make it incrementally easier for businesses and households to get loans, encourage investors to consider paying higher prices for stocks and reduce the pressure on the entire financial system.
Of course, the drop in yields could end up shooting Wall Street in the foot later. Powell said that a run higher in Treasury yields could displace the need for another rate hike if it is “persistent.” If the 10-year yield ends up quickly dropping back to where it was in the summer, that could make the Federal Reserve more nervous.
“That was an interesting nuance, but I don’t think it overrides the majority of his comments that suggested it’s more likely than not that the Fed is done hiking,” said Lon Erickson, portfolio manager at Thornburg Investment Management.
Hopes for no more Fed hikes had financial markets around the world ebullient. Stock indexes jumped 1.8% in South Korea, 1.1% in Japan, 1.8% in Germany and 2.2% in France.
In London, the FTSE 100 climbed 1.5% after the Bank of England left its main interest alone, like the Fed.
Some reports on the U.S. economy also showed a bit of momentum that could help ease the pressure on high inflation. Fed officials are carefully watching such data as they hope to get comfortable rates are high enough to sustainably drive inflation back down to their 2% target.
One preliminary report Thursday said U.S. businesses produced more stuff during the summer than the number of hours worked increased, indicating they got more efficient. Such gains in productivity could ease pressure on inflation while helping the economy to grow.
Productivity looks like it may be set for a continued uptrend over the next two years, aided in part by adoption of artificial-intelligence technology, according to economists at Deutsche Bank.
A separate report, meanwhile, said slightly more U.S. workers applied for unemployment benefits last week than expected. That’s bad news for those workers, but a cooler job market could also take pressure off inflation.
Big U.S. companies meanwhile continue to report better profits for the summer than analysts expected.
Eli Lilly was one of the strongest forces pushing the S&P 500 upward after it reported stronger profit and revenue than analysts estimated. Its stock rose 4.1% after it said it benefited from soaring sales for its blockbuster diabetes treatment, Mounjaro, which is widely used for weight loss.
Starbucks jumped 10.1% after reporting stronger profit and revenue for the latest quarter than Wall Street forecast. It benefited from customers buying more and paying higher prices.
Also on Thursday, Cedar Fair and Six Flags said they’ll merge to create an expansive amusement park operator with operations spread across 17 U.S. states and three countries. Their stocks were mixed, but both remain up more than 4% this week after rumors of the deal spread.
On the losing end of Wall Street was Moderna, which sank 8.3% after reporting a much worse loss for the latest quarter than analysts expected.
More swings could be coming for Wall Street. After trading closes for the day, Apple will report results for its latest quarter. As the most valuable U.S. stock, its movements carry extra weight on the S&P 500 and other indexes.
Earlier this reporting season, some of the market’s other most influential Big Tech stocks dragged on indexes after their results failed to live up to very high expectations.
On Friday morning will come the latest monthly update on the U.S. jobs market. Economists expect it to show a slowdown in hiring for October.
A remarkably resilient job market has helped to keep the economy out of a long-predicted recession, but the fear at the Fed is too much strength there could push upward on inflation.
