Wall Street pulls back as interest rates fall, focus on Fed path

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  • Energy stocks follow the drop in oil
  • The Fed’s Beige Book said price pressures remain persistent
  • Dow up 1.23%, S&P 500 up 1.48%, Nasdaq up 1.63%

Sept 7 (Reuters) – U.S. stock indexes climbed on Wednesday after a recent sell-off as bond yields fell as investors awaited more clarity on the Federal Reserve’s monetary tightening plans.

The tech-heavy Nasdaq (.IXIC) led gains among the major indexes, looking to snap a seven-session losing streak. Shares of Inc ( AMZN.O ) rose 2.0%.

US stocks have sold off sharply since mid-August after hawkish comments from Fed Chairman Jerome Powell were bolstered by signs of an economic slowdown in Europe and China and aggressive moves by major central banks to curb inflation.

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Data signaling strength in the US economy has traders betting on a 75 basis point Fed rate hike later this month. Fed fund futures suggested investors were pricing in a more than 78% chance of such a move.

The 10-year Treasury yield fell from three-month highs hit earlier in the session, lifting shares of price-sensitive stocks such as Tesla Inc ( TSLA.O ) and Microsoft Corp ( MSFT.O ).

“Bond markets are behaving a little better today, which gives the stock market a little better feel, but the big concerns remain what the Fed is going to do on September 21st. 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 hawkish comments from the Federal Reserve earlier on Wednesday. Cleveland Federal Reserve Bank President Loretta Mester said the high cost of U.S. rental housing has not yet fully filtered through to measures of inflation, suggesting inflation could still rise further. read more

Meanwhile, Richmond Fed President Thomas Barkin said the U.S. central bank must raise interest rates to a level that constrains economic activity and keep them there until policymakers are “convinced” that inflation is slowing, while Fed Deputy Governor 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 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 U.S. economy, indicated that price pressures are expected to persist at least through the end of the year.

By 2:20 p.m. ET, the Dow Jones Industrial Average (.DJI) was up 383.62 points, or 1.23%, at 31,528.92, the S&P 500 (.SPX) was up 57.8 points, or 1.48%, to 3,965.99 Composites. ) added 188.05 points, or 1.63%, to 11,732.96.

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

The energy index (.SPNY) fell 1.2% as oil prices fell nearly 4% on concerns about looming recession risks. Brent oil fell below 90 dollars a barrel. read more

Nio Inc reversed earlier losses and was last up 1.8% after the Chinese electric car maker reported a wider adjusted net loss in the second quarter, but revenue beat expectations.

Coupa Software Inc ( COUP.O ) rose 15.3% after the payments management software firm beat second-quarter revenue and profit estimates.

Advances outnumbered decliners on the NYSE by a ratio of 2.73 to 1; on the Nasdaq, a ratio of 2.15 to 1 favored advances.

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: Thomson Reuters Trust Principles.

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