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NEW YORK, Feb. 2 (AP) – Wall Street rose further on Thursday, led by euphoria in tech stocks and a surge in Facebook’s parent company.
The S&P 500 rose 1.5% in midday trading a day after hitting its highest level since August. The Nasdaq Composite was up 3.1% as of 12:35 p.m. ET, while the Dow Jones Industrial Average lagged behind as it placed less emphasis on technology stocks. It fell 137 points, or 0.4%, to 33,955.
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Meta led the gains by nearly 26% after reporting revenue for the latest quarter that beat analysts’ expectations and said it expected spending this year to be lower than earlier forecasts. While its latest profit missed expectations, Facebook’s parent company also announced a plan to buy back $40 billion in stock.
Stocks have been rallying at the start of the year on hopes that the Federal Reserve may soon pause in rate hikes. This increase helps curb inflation, but it can also hurt the economy and investment prices.
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Stocks and bonds rose a day earlier after Federal Reserve Chairman Jerome Powell said the central bank was finally starting to see progress in its fight against inflation. The market took that as a hint that a pause might indeed be imminent, with investors even ramping up bets on a rate cut by the end of the year. Rate cuts are like steroids for the market, stimulating prices and providing support to the economy.
That’s despite Powell’s suggestion on Wednesday that several rate hikes may be appropriate to bring inflation down to the Fed’s target. He also said he did not expect a rate cut in 2023 and reiterated his pledge to “stay the course until the job is done” in beating inflation.
“The market is saying the Fed may have its cake and eat it: Inflation is down and growth has not fallen off a cliff so far,” said Ella Hoxha, senior investment manager at Pictet Asset Management.
Markets seem to be pricing in a 75 percent chance the Fed will engineer a “soft landing” for the economy, where inflation can come back from soaring heights without tipping the economy into a painful recession, she said.
“The best we can say is it’s 50 percent, it could be lower,” Hoxha said.
She said the Fed could still have to take a tougher stance on interest rates than markets expected if the U.S. labor market remains tight. That gave her pause at a time when global stock and bond prices are rising so strongly.
“It feels like the market really wants to pick up coins before the steamroller,” she said.
Thursday’s gains came across the Atlantic, with markets rising after central banks in Europe and the United Kingdom also raised interest rates to curb inflation.
The European Central Bank raised its key interest rate by 0.50 percentage point and said it would raise rates again next month. The Bank of England also raised its key interest rate by half a percentage point and said it saw signs that inflation had turned, although it also stressed that it was too early to declare victory over inflation.
European stocks rose, with Germany’s DAX rebounding 2.2%. London’s FTSE 100 rose 0.8%.
Trends in Asia were more muted, with Hong Kong’s Hang Seng down 0.5 percent and Japan’s Nikkei 225 up 0.2 percent.
The next big event on Wall Street will be a slew of earnings reports from big tech companies after trading closes on Thursday, including Apple, Amazon and Google parent Alphabet. Both rose by more than 3%. Because these stocks have the largest market capitalization, their movements have a greater impact on the S&P 500 and other indexes.
It will be followed by Friday’s jobs report, where economists expect a slowdown in hiring. Even in the face of the Federal Reserve’s rapid rate hikes last year, the job market has remained largely resilient.
Big tech companies have recently announced high-profile job cuts, but a report on Thursday showed layoffs were not widespread. Fewer than expected workers filed for unemployment benefits last week, and the number fell to the lowest level since April.
U.S. Treasury yields fell further on Thursday, suggesting market expectations for an easier Fed. The yield on the 10-year U.S. Treasury note, which helps set rates on mortgages and other important lending, fell to 3.36% from 3.42% late on Wednesday. The two-year yield, which is more influenced by Fed expectations, fell to 4.07% from 4.10%. (Associated Press)
(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)
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