S&P 500 Rises Amid Speculation on Central Bank Moves
Economic data from the US and Europe indicated that central banks might halt interest-rate hikes to avert a recession, causing stocks to rise and bond yields to drop. The S&P 500 increased by 1.1%, its most significant gain since June, driven primarily by the tech sector and Nvidia Corp.’s anticipated earnings. US business activity showed minimal growth, resulting in the US two-year Treasury yields dropping below 5%. In Europe, the 10-year German rate decreased as private-sector activity in the euro area continued its contraction.
The US mortgage sector showed home purchase applications at a near 30-year low, though new-home sales reached a peak unseen in over a year. Rising mortgage rates have limited resale market inventory. Meanwhile, traders considered a US government report suggesting that job growth might be adjusted downward by 306,000 for the year ending March – a smaller decrease than predicted by some.
Recent bond developments were influenced by both technical factors and speculation about long-term interest rates. Jerome Powell, expected to speak at the upcoming Kansas City Fed’s Jackson Hole Economic Policy Symposium, will provide insights into potential policy shifts after last month’s rate increase.
The previous approach had been to consistently raise interest rates to manage high inflation. However, as inflation slows, policymakers debate the next steps. The upcoming speech by Powell will likely address this.
Another focal point for the market is the future of artificial intelligence (AI) and its impact on stock trader sentiment. Nvidia, central to the AI discussion, will announce critical results. Furthermore, various companies reported earnings, with Kohl’s Corp. and Urban Outfitters Inc. exceeding expectations, while Foot Locker Inc. fell short.
Corporate Highlights:
- Esmark Inc. decided against a takeover bid for US Steel Corp. (NYSE:X), influenced by the United Steelworkers’ backing of a $7.25 billion offer from Cleveland-Cliffs Inc.
- WeWork Inc. (NYSE: WE) is seeking guidance on a potential restructuring amidst financial struggles.
- Toll Brothers Inc. (NYSE: TOL) reported encouraging quarterly numbers and adjusted sales projections upwards.
- Advance Auto Parts Inc. (NYSE: AAP) announced a new CEO and is reviewing its business strategies.
- Grab Holdings Ltd. (NASDAQ: GRAB) improved its profitability targets, thanks to extensive cost reductions.
- Peloton Interactive Inc. (NASDAQ: PTON) provided a modest revenue projection and incurred higher-than-expected product recall expenses.
- Mallinckrodt Plc (NYSE: MNK) is considering its second bankruptcy in three years, amidst accusations of contributing to the US opioid crisis.
