The stocks experienced a rebound on Thursday, shaking off earlier losses in the week as the Federal Reserve made a pivotal announcement to maintain its stance on interest rates, dashing hopes of an imminent rate cut. The news ignited a rally across major indices, with the S&P 500 leading the charge, surging by 0.6%. The Dow Jones Industrial Average followed closely, climbing 0.3%, and the tech-centric Nasdaq Composite roared ahead with an impressive 0.8% gain.
The Federal Reserve’s announcement to keep interest rates “higher for longer” comes on the heels of U.S. government estimates indicating a steady 2.1% change in second-quarter Gross Domestic Product (GDP). Additionally, official jobless claims data, though showing a slight increase from the previous week, remained lower than expected. However, the National Association of Realtors revealed a concerning 7.1% drop in pending home sales from July to August, raising concerns about the housing market’s stability.
The economy’s inflationary pulse has been under close scrutiny by both the markets and the Fed. The rapid ascent of the 10-year Treasury yield had previously caused jitters, but it has now tempered somewhat while still hovering near 4.6%. The surge in oil prices earlier in the week, pushing crude oil to fresh 2023 highs, added to the Fed’s reluctance to consider a rate cut. However, oil prices started to recede on Thursday, with West Texas Intermediate futures slipping under $92 a barrel, and Brent crude futures hovering around $95.
Friday is set to bring the most eagerly anticipated economic figures of the week – the reading on Personal Consumption Expenditures (PCE) inflation, a key indicator closely monitored by the Federal Reserve. While inflationary pressures are apparent, many market observers believe that the strength of the American consumer could play a pivotal role in shaping the Fed’s future decisions.
Notably, chipmaker Micron faced a setback as its stock tumbled by 4% following an announcement that its first-quarter losses would be wider than previously anticipated. Despite this challenging news, the overall resilience displayed by stocks after a week of significant volatility and the Fed’s commitment to “higher for longer” rates has sparked optimism among investors.
The decision of the Federal Reserve to maintain higher interest rates fueled a resounding rebound in stocks, showcasing the market’s adaptability in response to economic shifts. With the Federal Reserve’s decision dominating headlines, the market’s ability to withstand turbulence and adapt to new circumstances remains a testament to its enduring strength and resilience.
Source: Yahoo Finance
