Stocks continued their rally on Thursday as the market continued to digest Federal Reserve minutes suggesting the central bank may slow its rate hike at some point.
Shortly after opening, the
Dow Jones Industrial Average
was up 329 points, or 1%. the
gained 0.9% and the
advanced by 0.8%.
The gains follow a rally on Wednesday, when Fed minutes were released. Yesterday, the S&P 500 and the Nasdaq both gained at least 1%, while the Dow gained 0.6%.
The minutes were “not as hawkish as feared,” wrote Tom Essaye, founder of Sevens Report Research.
The most important conclusion of the minutes? The Fed could become less aggressive in raising interest rates. Markets still expect several more hikes at upcoming Fed meetings this year, which the central bank acknowledged, and the minutes confirmed its intention to raise short-term rates by half a point percentage at each of the next two meetings. . But with the already slowing housing market and other sectors of the economy also suggesting slower growth, the minutes also showed the Fed may soon adjust the pace.
This two-day market rally is primarily built “on the premise that the Fed may ‘pause’ rate hikes after the two 50 basis point adjustments this summer,” Essaye wrote.
The bond market also reflected the potential for lower-than-expected rate hikes. The 2-year Treasury yield, which attempts to predict where the benchmark lending rate will be in a few years, fell to 2.44%, after a pandemic-era high of 2.76% hit in early May.
“Markets reassess the Fed after yesterday’s FOMC minutes,” wrote Andrew Brenner of NatAlliance Securities. “Our view was that the Fed is showing some restraint and may only raise rates by 50 in the next two meetings and 25 in September and then may stop.”
The lower-than-expected rates are a relief for now, but the next test will be on Friday. That’s when the personal consumption expenditure inflation data hits the wires. The previous reading showed a 6.6% year-over-year price gain. Markets need to see that inflation declines quickly, not slowly, from this level. The longer inflation stays high, the more likely it is that the Fed will remain aggressive in raising rates.
Overall, the US indices are down double digits in percentage terms for the year, and they continue to work their way up to key levels from which they can continue higher.
“With a ton of moving parts, the bottom line is that the market is in a fragile place with no shortage of headwinds that could tip the scales,” wrote Mike Loewengart, managing director of investment strategy at ETrade.
Here are some other stocks moving on Thursday:
(ticker: TWTR) shares rose 4.4% after Elon Musk said in a regulatory filing that he no longer plans to finance part of his acquisition of the social media company with a margin loan.
(SPLK) rose 8.1% after the data security and IT monitoring software provider reported better than expected fiscal first quarter results.
(WSM) gained 11%, after the home furnishings retailer’s first-quarter earnings comfortably beat Wall Street estimates.
(AAPL) fell 0.9% after a Bloomberg report said the tech giant will produce fewer iPhones this year than many analysts expected as it faces supply chain issues. supply and lower consumer spending.
(NVDA) fell 0.6% after the company reported earnings of $1.36 per share, beating estimates of $1.29 per share, on sales of $8.29 billion, over above expectations of $8.11 billion. The company also said sales for the current quarter would see a $500 million impact on sales due to Russia-related challenges and lockdowns in China.
On the positive side, “a stronger than expected recovery in China could be on the upside as we remain bullish on NVDA’s secular software/omniverse/automotive-related opportunities,” wrote CFRA analyst Angelo Zino.
(SNOW) fell 13% after the company reported a loss of 53 cents per share on sales of $422.4 million, above expectations of $412.8 million.
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