Today’s News
Video Source: Wall Street Journal News
On Wednesday, the stock market experienced a resurgence following Federal Reserve Chair Jerome Powell’s assurance to the House Financial Services Committee that the central bank maintains its course toward reducing interest rates this year. Powell’s remarks, released before the opening bell, initially propelled major indexes upwards, although they tapered off towards the market close.
The Nasdaq Composite, heavily weighted towards technology, concluded 0.6% higher, closely followed by the S&P 500, which saw a 0.5% increase. The Dow Jones Industrial Average also made a modest gain of 0.2%, equivalent to 76 points.
Within the S&P 500, all industry groups witnessed gains, except for communication services and companies dependent on discretionary spending. The leading sectors were utility stocks, followed by technology stocks, which collectively rose despite setbacks in five of the previously influential “Magnificent Seven” stocks that fueled last year’s rally.
Although the three major indexes remained down for the week, having declined on Monday and Tuesday after a surge powered by Nvidia the previous week, investors found reassurance on Wednesday. Powell emphasized that despite hotter-than-expected inflation and January’s robust hiring data, the Fed’s expectation of lowering rates later in the year remains intact.
Image Source: The Wall Street Journal
“We want to see a little bit more data so that we can become confident,” Powell stated before the House Financial Services Committee. “We’re not looking for better inflation readings than we’ve had. We’re just looking for more of them.”
Scott Pike, senior portfolio manager at Income Research + Management, noted that Powell’s comments echoed earlier sentiments from him and other Fed officials, emphasizing the importance of waiting for confirmation from inflation and labor market data before considering rate cuts.
Market participants, eager for any deviation from this message, seemed to find little change in Powell’s statements. Pike remarked, “It doesn’t appear that we got that today.”
Clients and prospects of Pike’s firm are actively considering the timing of a shift from short-term Treasurys yielding more than 5% to longer-term bonds, anticipating a rise in their prices as rates decline. Meanwhile, yields on 10-year Treasury notes experienced their fifth decline in six days, falling from 4.136% to 4.104% on Tuesday.
Irene Tunkel, Chief U.S. Equities Strategist at BCA Research, attributed recent stock market gains to a “fear of missing out.” She highlighted that retail investors, scarred by the 2022 equity market downturn, are now witnessing a recovery and an increasing number of profitable opportunities.
Even bearish money managers are re-entering the stock market, driven by the pressure to invest as benchmarks continue to outpace their expectations. Tunkel revealed that in a recent client poll, three-quarters of respondents expressed the need to deploy available funds, indicating a willingness to participate in the market rally despite potential apprehensions.
In individual stock movements on Wednesday, Nvidia continued its ascent with a 3.2% gain. DexCom shares led the S&P higher, rising 9.8% after the FDA cleared its latest body-worn glucose monitor for over-the-counter sales. Technology firms CrowdStrike and Box reported quarterly earnings, experiencing gains of 11% and 8.6%, respectively.
Conversely, retailers Nordstrom and Foot Locker faced declines of 16% and 29%, respectively, following quarterly results that exceeded Wall Street expectations but disappointed investors with their outlooks. Recreational vehicle manufacturers, considered economic bellwethers tied to discretionary spending, suffered losses after Airstream maker Thor Industries reduced its sales and earnings guidance, resulting in a 15% drop in Thor’s shares and a 6% decline for rival Winnebago Industries.
In the commodities market, gold futures set a record, rising 0.8% to USD 2150.30 per troy ounce. Benchmark U.S. oil futures added 98 cents per barrel to close at USD 79.13 after a weekly government report revealed a larger-than-expected drawdown of fuel supplies.
On the international front, stocks were predominantly higher, with the Stoxx Europe 600 index reaching a new record with a 0.4% climb. Germany’s DAX registered a 0.1% increase, Hong Kong’s Hang Seng rose by 1.7%, while the Shanghai Composite and Korea’s Kospi Composite both experienced a 0.3% decline.
Other News
SEC Approves Emission Disclosure Rule Amid Controversy
The SEC has approved new rules for public companies to disclose greenhouse-gas emissions, excluding disputed provisions on certain indirect emissions, sparking debate over the extent of regulatory authority and concerns about emissions exclusions.
U.S. Regulators To Ease Basel Capital Burden
U.S. regulators are expected to reduce proposed Basel III capital requirements for banks, responding to strong pushback from Wall Street, with potential adjustments to operational risks and mortgage weights.
ASEAN Banks Anticipate Dip Amid Rate Cut Signals
Major Southeast Asian banks, including Singapore’s DBS, UOB, and OCBC, anticipate a slowdown in loan income as the U.S. Federal Reserve hints at potential rate cuts. Shifting strategies becomes imperative to sustain growth in the evolving interest rate landscape.
