Stock Market Rallies on Bet That Rate Hikes Are Nearly Over
The rally comes after the Fed decided to pause its series of rate hikes, which had seen 10 consecutive increases.
On Thursday, the Dow Jones Industrial Average (DJI) rallied by over 300 points, and the S&P 500 (SPX) reached a new 13-month peak, driven by investor optimism that the Federal Reserve’s rate-hiking campaign could be nearing its end. This comes after the Fed decided to pause its series of rate hikes, which had seen 10 consecutive increases.
The Dow increased by 356 points or 1.1%, while the S&P 500 and Nasdaq Composite (IXIC) rose by 0.8% and 0.6% respectively. Bond yields decreased, and tech stocks continued to spearhead the market upswing, reflecting the ongoing trend in 2023. The S&P 500’s ascent on Thursday marked not only a new 13-month intraday high for the index but also its best week since March 31.
The day’s gains propelled the S&P 500 and Nasdaq to their highest intraday levels since April 2022. Some market observers, like Dylan Kremer of Certuity, are now questioning whether value and cyclical stocks can catch up with growth and tech stocks, which could further boost market momentum.
The S&P 500 is currently experiencing its longest winning streak since November 2021 and is on track for its strongest weekly gain since March. From its low point in October, the index has risen by 23% and has increased by 14% since the start of the year. The Nasdaq, which has a strong tech focus, has risen by more than 30% in 2023. Tech stocks, including Microsoft (NASDAQ: MSFT) and Oracle (NYSE: ORCL), saw gains exceeding 2.5%, while Alibaba’s (NYSE: BABA) stock rose by 2.7%.
Fed Meeting
Fed Chair Jerome Powell, in a post-meeting press conference, indicated that the Federal Open Market Committee would use the six weeks until its next meeting. This would be used to evaluate the cumulative tightening of monetary policy, with a decision on the policy move in July not yet determined, which we touched on in yesterday’s article. Despite this uncertainty, investors remain optimistic, as shown by Thursday’s market upswing.
Economic data released on Thursday provided more insight into the strength of the labor market and consumer spending. Weekly jobless claims were slightly above expectations at 262,000 compared to a Dow Jones estimate of 245,000, while retail sales increased by 0.3%.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.
