Wall Street gains as traders fears of aggressive rate hikes ease

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 30, 2022. REUTERS/Brendan McDermid

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  • Weekly jobless claims rise unexpectedly
  • GameStop wins on stock split
  • Samsung results boost chipmakers
  • Indices up: Dow 0.89%, S&P 1.36%, Nasdaq 2.21%

July 7 (Reuters) – Wall Street benchmarks rose on Thursday as investors reacted positively to yesterday’s comment from the U.S. Federal Reserve that suggested the central bank’s aggressive pace of raising interest rates could be tempered if growth suffered.

US stock markets stabilized in July after a sharp selloff in the first half amid soaring inflation, the conflict in Ukraine and the Fed’s abandonment of the easy money policy.

The benchmark S&P 500 index (.SPX) is up 3% so far this month, after posting its biggest first-half percentage decline since 1970.

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Minutes of the central bank’s June monetary policy meeting, in which the Fed raised interest rates by three-quarters of a percentage point, showed a firm reaffirmation on Wednesday of its intention to rein in the costs. Read more

However, Fed officials acknowledged the risk that rate hikes would have a “bigger than expected” impact on economic growth and said a 50 or 75 basis point hike would likely be appropriate at the meeting. July policy.

“(Rate hike) expectations for the July meeting haven’t changed much, but expectations later in the year are coming down a bit,” said Michelle Cluver, portfolio strategist at Global X ETFs.

Although investors widely expect the Fed to hike rates another 75 basis points in July, expectations for the peak terminal rate next year have fallen significantly amid growing concerns about a slowdown. global economy.

Fed funds futures traders expect the benchmark rate to peak at 3.44% in March. Prior to the June meeting, it was expected to drop to around 4% by May. It is currently 1.58%. , .

Goldman Sachs forecasts a 75 basis point rate hike this month, a 50 basis point hike in September and 25 basis point hikes in November and December.

A report on Thursday showed the number of Americans filing new claims for unemployment benefits unexpectedly rose last week and demand for labor is slowing, with layoffs hitting a 16-month high in June. Read more

A closely watched jobs report on Friday is expected to show nonfarm payrolls likely increased by 268,000 jobs last month after rising by 390,000 in May.

As of 2:01 p.m. EDT, the Dow Jones Industrial Average (.DJI) rose 277.09 points, or 0.89%, to 31,314.77, the S&P 500 (.SPX) gained 52.21 points, or 1.36%, to 3,897.29 and the Nasdaq Composite (.IXIC) added 250.70 points, or 2.21%, to 11,612.55.

There were gains for high-growth stocks, which had suffered in the first half of 2022 as investors worried about their prospects in a rising interest rate environment: Tesla Inc (TSLA.O) rose 5.5% and Google’s parent company Alphabet Inc (GOOGL.O) rose 3.4%.

GameStop Corp (GME.N) rose 12.8% as the video game retailer’s board approved a four-for-one stock split. Another major meme stock, AMC Entertainment (AMC.N), jumped 14.4%. Read more

Intel Corp (INTC.O), Nvidia Corp (NVDA.O) and Qualcomm Inc (QCOM.O) gained after South Korea’s Samsung Electronics (005930.KS) posted its best second-quarter profit since 2018, pulled by strong sales of memory chips.

The broader Philadelphia SE Semiconductor Index (.SOX) climbed 4.6%.

Almost every S&P sub-sector was up, with the 3.6% gain in the energy index (.SPNY) the best performer as oil and gas companies followed the rebound in crude prices compared to the previous day’s 12-week low.

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Reporting by David French in New York and Amruta Khandekar and Bansari Mayur Karmdar in Bangalore Additional reporting by Devik Jain in Bangalore Editing by Anil D’Silva and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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