Fundamental Analysis

Wall St Gains As Hopes Of Fed Rate-Hike Pause Grow

Wall Street’s main indexes climbed on Thursday as major rate-sensitive technology and growth stocks advanced after the Federal Reserve hinted it was close to pausing interest rate hikes amid turbulence in the banking sector.

The U.S. central bank on Wednesday raised rates by an expected 25 basis points, but its policy statement no longer said “ongoing increases” would likely be appropriate, indicating a clear shift in its stance.

The Fed’s softer tone relieved markets that have been roiled by concerns about a liquidity crisis in the banking sector since the failure of two U.S. regional lenders earlier this month.

Wall Street’s main indexes had closed sharply lower on Wednesday after Fed Chair Jerome Powell said the central bank was still intent on fighting inflation even as he flagged credit issues due to banking troubles could have “significant” implications for the economy.

“Markets are hoping that you have one more interest rate hike to go, probably,” said Robert Pavlik, senior portfolio manager, Dakota Wealth in Fairfield, Connecticut.

“I would imagine the hopes (of a rate cut) are smashed. You don’t want things going so south that you need a rate cut.”

Traders’ bets are almost equally split between the Fed pausing its rate hikes in May and another 25 bps hike, according to CME Group’s Fedwatch tool.

As U.S. Treasury yields slipped on growing hopes of an end to the Fed’s tightening cycle, Apple Inc (AAPL.O), Microsoft (MSFT.O) and Amazon.com (AMZN.O) jumped between 0.9% and 1.6% in early trading.

Communication services (.SPLRCL) and information technology (.SPLRCT) led the gains among the S&P 500 sector indexes, all of which rose, except utilities (.SPLRCU).

Bank of America (BAC.N) and UBS (UBS.N) now see the Fed funds rate target peaking at 5-5.25% in May compared to earlier forecasts of 5.25-5.5%.

Troubled regional lender First Republic Bank (FRC.N) jumped 4.6% after slumping on Wednesday following Treasury Secretary Janet Yellen’s remark that there was no discussion on insuring all bank deposits.

PacWest Bancorp (PACW.O) and Western Alliance Bancorp (WAL.N) gained 2.7% and 7.1% , respectively.

Meanwhile, data showed jobless claims falling to 191,000 last week from the week prior, against expectations that the number would rise to 197,000.

At 9:33 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 195.44 points, or 0.61%, at 32,225.55, the S&P 500 (.SPX) was up 33.23 points, or 0.84%, at 3,970.20, and the Nasdaq Composite (.IXIC) was up 155.00 points, or 1.33%, at 11,824.95.

Shares of Block Inc (SQ.N) fell 20% after Hindenburg Research said it held short positions in the Jack Dorsey-led payments firm.

Among others, Nvidia Corp (NVDA.O) rose 3.0% after Needham raised its price target on the chipmaker on likely benefit from near-term data center strength.

Coinbase Global Inc (COIN.O) slid 16% after the U.S. Securities and Exchange Commission (SEC) threatened to sue the crypto exchange over some of its products.

Accenture Plc rose 3.8% after the company said it would cut about 2.5% of its workforce.

Advancing issues outnumbered decliners by a 3.62-to-1 ratio on the NYSE and 3.27-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and five new lows, while the Nasdaq recorded 17 new highs and 27 new lows.

Source

Arvinth Akash

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