Fed Chair Powell successfully communicated to markets without spooking stocks.
Mark Wilson/Getty Images
The September stock market slump might just be over. Investors showed signs of renewed confidence on Thursday, sending stocks higher as they took comfort from the Chinese central bank’s injection of more cash into the banking system as well as a steady hand from the Federal Reserve at its Wednesday meeting.
The Dow gained 507 points, or 1.5%, to close at 34,764.82 on Thursday, marking the index’s largest two-day percentage gain since March. The S&P 500 rose 1.2% and the Nasdaq Composite advanced 1%. This is the second straight day of gains for the major indexes.
Overall, the market’s two-day rise has felt convincing. The S&P 500 is up more than 3% from its lowest point this week, with the vast majority of the index’s stocks participating in Thursday’s rally, according to FactSet. The index has also returned to trading above its 50-day moving average, a key technical level. Also, the two trading days leading into Thursday saw moments during which the New York Stock Exchange’s rising stocks outnumbered decliners by more than 1,500. The last time that happened this year, it came after a brief pullback and then stocks performed well the following two weeks, according to Instinet.
“The global relief rally that began on Tuesday evening is continuing today,” writes Michael Reinking, senior market strategist at New York Stock Exchange. He noted that Wednesday’s Fed announcement offered no surprises.” On the China Evergrande Group (ticker: EGRNF) situation, “investors are getting more comfortable about any contagion risk,” Reinking says.
Although Evergrande
may be in trouble, markets are unconcerned about ripple effects. The People’s Bank of China has injected another $17 billion into the banking system after putting in $13 billion earlier this week.
The injection helps shore up the Chinese banking system, while U.S. banks are also not even highly exposed to credit risk in China. Wells Fargo analysts say none of the major U.S. banks have more than 1.5% of their assets tied to Chinese cross-border deals.
Evergrande stock rose 17.6% in Hong Kong—but remains down 81% year to date.
As for the Fed, Chairman Jerome Powell made no indication Wednesday that the central bank will reduce monthly bond purchases by any more than the currently expected $15 billion. If the Fed moves faster than that, it could reduce the price of long-dated bonds more than expected, raising the yield, which makes future profits less valuable. For now, markets expect a gradual reduction in the bond buying program.
The 10-year Treasury yield has advanced to 1.42% from 1.32% at Wednesday’s close, though it’s still below its 2021 high of 1.75%.
While weekly jobless claims rose slightly to 351,000, above expectations for a decline to 320,000, the four-week average remains near its lowest level of the pandemic.
Here are 9 stocks on the move Thursday:
Hydrogen fuel cell developer Plug Power (PLUG) rose 3.2%, extending gains from Wednesday, amid a report from Reuters that German automobile makers were betting on a hydrogen-powered future.
Dell Technologies (DELL) gained 3.4% after the company said it saw 3% to 4% compounded annual revenue growth through fiscal 2026.
BlackBerry (BB) jumped 11% after reporting a loss of 6 cents a share, beating forecasts for a loss of 7 cents, on sales of $175 million, ahead of expectations for $168.8 million.
Darden Restaurants (DRI) has risen 6.1% after reporting a profit of $1.76 a share, beating forecasts for $1.65 a share, on sales of $2.31 billion, beating expectations for $2.24 billion.
Roku (ROKU) advanced 3% after getting upgraded to Buy from Neutral at Guggenheim.
Salesforce (CRM) was up 7.1% after raising its full-year sales guidance.
General Dynamics (GD) advanced 1.5% and Northrop Grumman (NOC) ticked up 0.6% after the stocks were upgraded to Neutral from Sell at Goldman Sachs.
Pfizer (PFE) stock rose 0.6% after the Food and Drug Administration authorized the company’s Covid-19 vaccine booster shot for high risk people or those above the age of 65.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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