On Thursday, US equities continued to rise, rebounding from the previous session’s decline with increases in the Dow, S&P 500, and Nasdaq.
Investors are pouring money into some of the biggest technological firms in the world, which are frequently viewed on Wall Street as a safe haven during stressful and uncertain economic times.
The Nasdaq 100 rose to its highest level since August as a result of a rebound in large-cap stocks like Apple Inc. and Microsoft Corp. The index had already crossed the bull market threshold at that point after rising over 20% from its December low. The group of internet giants with plenty of cash appears to be back in style in the wake of the banking turbulence that has shook markets throughout the world. This month, the tech-heavy gauge has performed significantly better than other benchmarks.
The Fed signalled only one more rate hike this year when it increased the fed funds rate by 25 basis points yesterday, but investors are increasingly betting that the Fed’s tightening campaign is nearing its conclusion. Notwithstanding Treasury Secretary Yellen’s claim to Congress that she hasn’t thought about or discussed broad insurance or deposit guarantees, bank shares have recovered. However, Coinbase dropped 12% when Oppenheimer cut its rating after it received a Wells notice from the Securities and Exchange Commission.
Here is today’s market update from José Torres, Senior Economist at Interactive Brokers:
Despite Powell’s hawkish tone, markets are rallying this morning as investors believe the Fed is finished hiking rates and will begin cutting them as soon as July.
Equities are higher, erasing yesterday’s steep losses, with the S&P 500 Index down 1.7% and the tech-heavy, interest rate-sensitive NASDAQ Index rising 2.4%. Short-term yields and the dollar are continuing to build on downside momentum as wagers of a lighter Fed mount.
The 2-year Treasury yield is hovering at its lowest level since September, down 7 bps to 3.91% after falling roughly 25 bps yesterday. The Dollar Index is down 0.1% after falling roughly 1% yesterday.
Oil prices are attempting to build some momentum after falling to their lowest levels since December 2021. WTI crude oil is up 0.8% to $71.50 a barrel as rising demand from the Chinese reopening offsets the deflationary pressure propelled by abundant supply in the U.S. The 10-year Treasury yield is roughly flat at 3.48%, supported by inflation expectations and higher oil prices.
Besides that, the new data has flowed in. Sales of new single-family houses in the US increased 1.1% month-over-month to a seasonally adjusted annualised rate of 640K in February of 2023, the highest level since August last year but below forecasts of 650K. It follows a downwardly revised 633K in January.
Sales increased 8.1% in the West to 133K and 3% in the South to 415K, offsetting decreases in the Midwest (-1.4% to 71K) and the Northeast (-40% to 21K).
The median price of new houses sold was $438,200 while the average sales price was $498,700, compared to $427,400 and $522,200 respectively a year ago. There were 436K houses left to sell, the lowest since April of 2022, corresponding to 8.2 months of supply at the current sales rate.
The number of Americans filing for unemployment benefits fell by 1,000 from the prior week to 191,000 on the week ending March 18th, compared to expectations of 197,000. The result provided further evidence of a stubbornly tight labor market, in line with the hot payroll figures for February and the Federal Reserve’s outlook of low unemployment.
The tight job market forces employers to raise wages to attract and keep staff, magnifying inflationary pressure on the American economy and adding leeway for the central bank to continue tightening monetary policy. The four-week moving average, which removes week-to-week volatility, fell by 250 to 196,250. On a non-seasonally adjusted basis, initial claims fell by 4,659 to 213,425, with notable declines in California (-2,411) and Illinois (-1,135).