Today’s Stock Market: Wall Street optimistically anticipates its best week of 2023 amid hopes for a stop to rate increases

Wall Street Skyrockets Amidst Hope of Ceased Interest Rate Hikes

Wall Street experienced a significant boost, building on the previous day’s rally, as hopes rose about the Federal Reserve possibly ending its interest rate hikes that had been causing market turbulence. The S&P 500 saw a 1.9% increase on Thursday, while the Dow added 564 points, and the Nasdaq composite climbed 1.8%. Global stocks soared after the Federal Reserve hinted late on Wednesday that the recent surge in Treasury yields could be acting as a substitute for rate hikes, providing a respite to Wall Street. There were also reports indicating a hopeful momentum in counteracting inflation in the U.S. economy.

Global Markets Respond Positively to Fed’s Stance

Global markets responded positively on Thursday to the possibility of the Federal Reserve ending its interest rate hikes. The S&P 500 was 1.8% higher and appeared set for a fourth consecutive winning day. Year to date, it has already risen by 4.8% and is on track for its best week in nearly a year. The Dow Jones Industrial Average and the Nasdaq composite also saw impressive gains, up by 503 points (or 1.5%) and 1.7% respectively. Markets worldwide responded positively to the Federal Reserve’s decision to not raise its main interest rate at its second consecutive meeting, a move seen as an attempt to curb high inflation.

Long-Term Treasury Yields Drop as Fed Chair Speaks

The financial markets also interpreted comments by the Fed Chair as an indication that recent increases in long-term Treasury yields might be acting as substitutes for rate hikes, potentially eliminating the need for further increases by the Fed. Long-term Treasury yields saw a drop as Fed Chair Jerome Powell spoke after the central bank’s decision and continued to fall on Thursday. This relieved some of the pressure on Wall Street and the entire financial system. However, the drop in yields could potentially backfire on Wall Street, as Powell indicated that a sustained rise in Treasury yields could replace the need for another rate hike.

Positive Reports on the U.S. Economy

Reports on the U.S. economy showed some potential momentum that could ease the pressure on high inflation. Federal officials are awaiting more such data before asserting that current rates are high enough to reduce inflation to the 2% target. Thursday saw a preliminary report indicating that U.S. businesses were becoming more efficient, producing more goods and services than the amount worked. This increase in productivity could alleviate inflation pressures while promoting economic growth. According to economists at Deutsche Bank, productivity may be set for a continuous uptrend in the next two years, aided in part by the adoption of artificial intelligence technology.

U.S. Corporations Report Better-than-Expected Profits

Big U.S. companies continue to report better profits for the summer than analysts expected. For example, Eli Lilly was one of the strongest forces pushing the S&P 500 upward after it reported stronger profit and revenue than estimated, benefiting from rising sales of its Mounjaro diabetes treatment. Starbucks saw a 10.3% increase after reporting stronger profit and revenue than Wall Street forecasted, with customers buying more and paying higher prices.

Upcoming Market Updates

More market movements may be on the horizon. Following the close of trading for the day, Apple will report its results for the latest quarter. As the most valuable U.S. stock, its movements greatly influence the S&P 500 and other indexes. The market’s other most influential Big Tech stocks have previously dragged on indexes after their results failed to meet very high expectations. On Friday morning, the latest monthly update on the U.S. job market will be released. Economists predict a slowdown in hiring for October. The Federal Reserve fears that too much strength in the job market could push inflation upwards.