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Wall Street rebounds as yields slip, focus on Fed path

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  • Energy stocks follow oil drop
  • Fed’s Beige Book Said Price Pressures Still Continue
  • Dow up 1.23%, S&P 500 up 1.48%, Nasdaq up 1.63%

Sept 7 (Reuters) – US stock indices rose Wednesday after a recent sell-off as bond yields fell as investors wait for more clarity on the Federal Reserve’s tightening plans.

The technology-heavy Nasdaq (.IXIC) led gains in major indices, looking for a seven-session loss streak. Shares of Amazon.com Inc (AMZN.O) rose 2.0%.

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.

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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 investors estimate a greater than 78% chance of such a move.

Ten-year government bond yields fell from a three-month high reached earlier in the session, boosting shares of price-sensitive stocks such as Tesla Inc (TSLA.O) and Microsoft Corp (MSFT.O).

“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’re seeing a tug-of-war every day,” Brent said. 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. read more

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Meanwhile, Richmond Fed president Thomas Barkin said the US central bank should raise interest rates to levels that constrain economic activity and keep them there until policymakers are “convinced” that inflation is on the decline, while Federal Reserve Vice Chairman Lael Brainard added that monetary policy should 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, indicated that price pressures are expected to last at least through the end of the year.

At 2:20 PM ET, the Dow Jones Industrial Average (.DJI) rose 383.62 points, or 1.23%, to 31,528.92, the S&P 500 (.SPX) gained 57.8 points, or 1.48% , to 3,965.99 and the Nasdaq Composite (.IXIC ) added 188.05 points, or 1.63%, to 11,732.96.

Ten of the 11 major S&P sectors were higher, led by a 2.7% rise in utilities (.SPLRCU), reflecting the defensive positioning of investors amid economic uncertainties.

The energy index (.SPNY) fell 1.2%, while oil prices fell nearly 4% on demand concerns related to looming recession risks. Brent oil fell below $90 a barrel. read more

Nio Inc reversed previous losses, most recently rising 1.8% 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 15.3% after the payment management software company beat second-quarter revenue and earnings estimates.

Emerging issues outperformed the falling on the NYSE by a 2.73-to-1 ratio; on Nasdaq, a ratio of 2.15 to 1 was favorable for advanced users.

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The S&P 500 posted 6 new 52-week highs and 16 new lows; the Nasdaq Composite recorded 13 new highs and 213 new lows.

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Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Editing by Anil D’Silva, Maju Samuel, Shounak Dasgupta and Aurora Ellis

Our Standards: The Thomson Reuters Trust Principles.

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