Wall Street edges higher, rally in banks offsets jitters about hawkish Fed

The Korea Times

The Korea Times

Finance

Sat, December 9, 2023 | 10:47

Markets

Wall Street edges higher, rally in banks offsets jitters about hawkish Fed

Posted : 2023-06-30 09:57

Updated : 2023-06-30 11:43

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, June 29. Reuters-Yonhap

U.S. stock indexes ticked up on Thursday as bank shares rose after major lenders cleared the Federal Reserve's annual stress test, while strong economic data stoked expectations of further interest rate hikes from the central bank.

Shares of Wells Fargo were up more than 4 percent while Goldman Sachs advanced more than 3 percent along with JPMorgan Chase after a health check showed the biggest U.S. banks have enough capital to weather a severe economic slump.

The SP 500 banks index gained more than 2 percent and the relief rally also helped boost the KBW Regional Banking index, which was up 1.5 percent.

Investors also gravitated toward economically sensitive sectors while shying away from rate-sensitive growth sectors after upbeat data dulled worries of an imminent recession.

The Russell 2000 index of small-cap stocks rose more than 1 percent, while the materials index led gains among the SP 500 sectors.

Data showed an unexpected weekly decline in the number of Americans filing new claims for unemployment benefits, and the U.S. GDP increased at a 2.0 percent annualized rate in the first quarter, up from the 1.3 percent pace reported previously.

Along with the stress test boost to banks, Liz Ann Sonders, chief investment strategist, Charles Schwab noted that rising yields across the U.S. Treasuries maturity spectrum was putting "downward pressure on the growth more highly-valued segments of the market" as investors adjusted rate expectations.

"Stronger than expected economic data is upping the probability of the Fed hiking rates again at the July meeting," said Sonders.

People walk past a Wells Fargo bank on Broadway on Dec. 20, 2022 in New York City. AFP-Yonhap

The Dow Jones Industrial Average rose 183.88 points, or 0.54 percent, to 34,036.54, the SP 500 gained 6.26 points, or 0.14 percent, to 4,383.12 and the Nasdaq Composite dropped 42.19 points, or 0.31 percent, to 13,549.56.

The SP 500 financial index, up 1.44 percent, was the biggest boost to the benchmark. The biggest drag was growth-focused communications services, down 0.75 percent.

The data was fueling bets that the U.S. central bank will maintain its tight monetary policy for longer, especially after hawkish comments from Fed Chair Jerome Powell on Wednesday.

Traders were pricing in a roughly 86.8 percent chance the Fed would hike interest rates by 25 basis points to the 5.25 percent-5.50 percent range at its July meeting, according to CME Group's Fedwatch tool, up from bets for 81.8 percent probability a day earlier.

The Personal Consumption Expenditure index (PCE), the Fed's preferred inflation gauge, for May will be released on Friday. Economists polled by Reuters expect core rates to remain steady at 4.7 percent.

The tech-heavy Nasdaq, under pressure from losses in megacaps including Amazon and Microsoft, was still on track for a gain of more than 29 percent in the first half, its biggest such gain in 40 years.

The Philadelphia semiconductor index was down about 0.5 percent, pressured by a 4 percent decline in Micron Technology shares, reversing early gains after the chipmaker beat estimates for third-quarter results.

Occidental Petroleum edged up 1.2 percent after Berkshire Hathaway said it added more shares of the oil firm, boosting its stake to above 25 percent.

Sportswear maker Nike inched down 0.2 percent ahead of its fourth-quarter results after the bell.

Advancing issues outnumbered declining ones on the NYSE by a 1.69-to-1 ratio; on Nasdaq, a 1.31-to-1 ratio favored advancers.

The SP 500 posted 41 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 83 new highs and 76 new lows. (Reuters)