The Nasdaq experienced a slight increase on Wednesday, thanks to the strong performance of megacap stocks. However, the S&P 500 and the Dow ended the day with losses after Federal Reserve Chair Jerome Powell indicated the likelihood of more rate hikes and expressed doubt that inflation would reach the central bank’s target rate in the next two years. Powell also suggested that the Fed may raise rates at its upcoming policy meeting in July.
Despite the S&P’s decline, investors seemed unperturbed by Powell’s comments due to positive signs in the economy, according to Quincy Krosby, Chief Global Strategist for LPL Financial. Krosby noted that a stronger underlying economy suggests that a recession is not expected in the near future, and the labor market’s resilience indicates that it can handle a 25 basis point rate hike at the next Federal Open Market Committee meeting.
Considering the persistently high inflation, Phil Blancato, CEO of Ladenburg Asset Management, commended Powell for maintaining tight policies. Blancato also observed seasonal trends, with the upcoming July 4 Independence Day holiday following a strong first half of the year for growth stocks. He stated that the market is content to take a break at this point.
Traders currently predict a 79.4 percent chance of a 25-basis-point interest rate hike to a range of 5.25 percent-5.50 percent in July, and they anticipate that the central bank will hold rates until the end of 2023, according to CMEGroup’s Fedwatch tool.
On Wednesday, the Dow Jones Industrial Average fell 0.22 percent, the S&P 500 dropped 0.04 percent, and the Nasdaq Composite rose 0.27 percent. Apple Inc reached an all-time high and achieved a record closing high for the second consecutive session. Tesla, Microsoft, and Alphabet also contributed significantly to the S&P’s performance.
However, chipmaker Nvidia, a popular choice among investors betting on artificial intelligence, had the most significant negative impact on the benchmark, closing down 1.8 percent. The Wall Street Journal reported that the United States might impose new restrictions on AI chip exports to China.
Energy and communications services were among the sectors that advanced, with increases of 1 percent and 0.8 percent, respectively. Defensive utilities, on the other hand, declined by 1.5 percent.
Krosby of LPL Financial also welcomed the growth of the Russell 2000 small cap stock index, which rose 0.5 percent for the third consecutive day, suggesting that investor interest is spreading beyond megacaps in the market.
Investors are eagerly awaiting the release of several key economic indicators later in the week, including the Personal Consumption Expenditures (PCE) index reading, initial jobless claims data, and the final reading of first-quarter GDP, to assess the state of the US economy.
The S&P banks index slipped 0.5 percent ahead of the Fed’s annual stress test results, which will be released after the market closes on Wednesday. The stress test helps determine the capital requirements for banks and their ability to engage in stock buybacks and dividends.
Netflix Inc, another major contributor to the S&P’s performance, rose 3 percent after Oppenheimer raised its price target. However, General Mills fell 5 percent after forecasting full-year profit below analysts’ expectations.
Advancing stocks slightly outnumbered declining stocks on the NYSE, while on the Nasdaq, advancers had a slight advantage. The S&P 500 recorded 39 new 52-week highs and 6 new lows, while the Nasdaq Composite recorded 70 new highs and 127 new lows.
On U.S. exchanges, 9.89 billion shares were traded, slightly lower than the 11.57 billion average for the past 20 sessions.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
