Tech rebound lifts stocks on Wall Street after early slide
BANGKOK — A late-afternoon rebound led by technology companies helped drive stocks higher on Wall Street Thursday, lifting the market from an early slide.
The S&P 500 rose 0.4%, its first gain after a two-day slump. The benchmark index is still on track for its first weekly loss in four months.
The Dow Jones Industrial Average rose 0.3%, while the tech-heavy Nasdaq saw a 0.1% increase. Crude oil prices fell and bond yields increased. The turbulent day of trading was caused by investors taking into account the Federal Reserve’s latest updates amid rising inflation concerns. The central bank has signaled it is prepared to keep raising interest rates and reducing its stockpile of bonds and mortgage-backed securities in order to rein in the highest inflation in 40 years. The market is definitely having to digest a Fed which appears to be willing be very aggressive in fighting inflation,” said Rob Haworth (senior investment strategist at U.S Bank Wealth Management).
The S&P 500 rose 19. 06 points to 4,500.21. The Dow gained 87. 06 points to 34,583.57. The blue-chip index had earlier been down 305 points. The Nasdaq added 8. 48 points to 13,897.30. Higher interest rates can make expensive growth stocks like those of Big Tech companies look less attractive relative their earnings. The indexes were down Thursday morning due to tech stocks being the biggest drags over the market in the last few days. The sector started to recover by midafternoon and helped lift the overall market. Microsoft rose 0.6%, Adobe rose 1.9%
Healthcare stocks, retailers and companies that rely upon direct consumer spending also rose, after being lower earlier in the day. Target rose 5.7%, Pfizer rose 4.3% and McDonald’s rose 1.2%.
Communication services stocks were among the biggest weights on the market. Twitter dropped 5.4%.
Computer and printer maker HP surged 14.8% for the biggest gain in the S&P 500 after Warren Buffett’s Berkshire Hathaway disclosed an 11% stake in the company.
Bond yields rose. The yield on the 10-year Treasury rose to 2. 65% from 2. 61% late Wednesday.
All major indexes are in the red for the week after two large losses, partly due to concerns about the Fed’s shifting policy to combat inflation.
Minutes from the Fed’s meeting last month showed policymakers agreed to begin cutting the central bank’s stockpile of Treasurys and mortgage-backed securities by about $95 billion a month, starting in May. This is more than many investors expected and almost doubles the pace at which the Fed has reduced its balance sheet.
The central bank is now moving away from low interest rates and the extraordinary support that it provided for the economy two year ago, when the pandemic pushed the economy into recession. Already, it announced a quarter-percentage rate increase and is expected continue to raise rates throughout the year.
Traders are now pricing in a nearly 80% probability the Fed will raise its key overnight rate by half a percentage point at its next meeting in May. That’s double the usual amount and something the Fed hasn’t done since 2000.
Persistently rising inflation has been threatening economic growth. Businesses have been increasing prices on everything, from food to clothing, which has increased the pressure on consumers. Some companies have not been able to offset the inflation impact, even with price increases.
Duncan Hines, Birds Eye brand maker ConAgra, cut its financial forecast for this year and stated that another round of price hikes will be necessary.
Wall Street worries that consumers will stop spending when higher prices are too hard to digest. The March increase in consumer spending was due to price increases. However, the results showed a pullback. A rapid rise in interest rates could also impact corporate earnings growth. However, how aggressive the Fed is will have an impact on that.
“Does it make sense to lower earnings expectations?” Haworth stated. “That’s what (the market) has been) trying to decide over these last few days. Is the aggressiveness of the Fed going to change that equation?”
Russia’s invasion of Ukraine has also added to concerns about inflation. The volatility of energy prices has driven gasoline prices higher. U.S. benchmark crude oil prices fell 0.2%, but are still up roughly 31% for the year.
Investors received an encouraging update on the job market Thursday. According to the Labor Department, fewer Americans applied for unemployment benefits last Wednesday as layoffs remain at historic low levels.
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