[New York Stock Market] Tech Stocks Rally on Fed Slowdown Expectations... Nasdaq Up 2.69%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] On the 2nd (local time), major indices of the U.S. New York stock market, which had been declining due to concerns about an economic slowdown, rebounded during the session and closed higher across the board. Expectations grew that the U.S. central bank, the Federal Reserve (Fed), might slow the pace of interest rate hikes after September, leading to bargain buying mainly in interest rate-sensitive tech stocks, consumer staples, and materials sectors.

At the New York Stock Exchange (NYSE) that day, the Dow Jones Industrial Average closed at 33,248.28, up 435.05 points (1.33%) from the previous session. The large-cap-focused S&P 500 index rose 75.59 points (1.84%) to 4,176.82, and the tech-heavy Nasdaq index gained 322.44 points (2.69%) to close at 12,316.90. The small-cap Russell 2000 index also finished higher at 1,897.67, up 42.85 points (2.31%).

By individual stocks, tech shares showed strength. Nvidia closed up 6.94% from the previous session. Tesla (+4.68%) and Zoom Video (+4.26%) jumped more than 4%. Meta Platforms surged over 5% after announcing that Chief Operating Officer (COO) Sheryl Sandberg would step down. Apple (+1.68%), Amazon (+3.15%), and Alphabet (+3.28%) also rose together.

Microsoft (MS, +0.79%) initially faced downward pressure due to a lowered quarterly earnings guidance citing a strong dollar but later turned upward. Earlier, MS lowered its revenue forecast for the quarter from $52.4 billion?$53.2 billion to $51.94 billion?$52.74 billion.

Consumer staples and materials stocks sensitive to the economy also rose across the board, including Nike (+3.99%), Home Depot (+2.92%), and Honeywell (+2.67%). Boeing climbed 7.54%. Salesforce jumped more than 7%. Pet supplies retailer Chewy soared 24% on strong earnings. Lululemon also rose over 4%. Conversely, Hewlett Packard Enterprise’s stock fell 5.20% after quarterly sales and net income missed market expectations.

The three major New York stock indices turned to an upward trend this week starting from that day. The Dow rose 0.1%, the S&P 500 gained 0.5%, and the Nasdaq increased 1.5%. Edward Moya, senior analyst at Oanda, pointed out that "bearish sentiment remains excessive." The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s ‘fear gauge,’ dropped nearly 4% from the previous session, hovering around the 24 level.

Experts are focusing on the employment data to be released on the 3rd. Tom Essaye, founder of Sevens Report Research, said, "One of the reasons stocks were able to rebound from the lows was the expectation that the Fed might pause further rate hikes," adding, "If the (Labor Department’s) employment report confirms this, it will be a tailwind for stock prices." Barry Bannister, chief equity strategist at Stifel, said, "The market is waiting to see if there is any pause in the Fed’s rate hike plans."

However, Fed Vice Chair Lael Brainard appeared on CNBC that day and drew a line against the notion of a September rate hike pause, saying, "It is very difficult at this time to find a basis for taking a break (from rate hikes)." Brainard emphasized that the Fed still has a long way to go to reach its 2% inflation target, stating, "We will undoubtedly do what is necessary to reverse inflation. This is our number one challenge." She mentioned, "If inflation does not show signs of slowing, it would be appropriate to proceed at the same pace (0.5 percentage point hike) at the next meeting."

In the New York bond market, the 10-year Treasury yield fell to 2.88% before narrowing the decline to around 2.91%.

Investors also watched private employment data that day. According to ADP, private sector employment increased by 128,000 in May, falling short of market expectations. This was the smallest increase since the large-scale decline caused by the pandemic in April 2020. This is considered an indicator to gauge the private sector employment situation ahead of the Labor Department’s employment report to be released on the 3rd. The May nonfarm payrolls reported by the Labor Department are expected to increase by 325,000, below the previous month’s (428,000) figure. Additionally, weekly jobless claims totaled 200,000, down 11,000 from the previous week, missing market expectations.

Oil prices continued to rise despite news that the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC major oil producers, known as OPEC Plus (+), agreed to increase production more than previously planned. On the New York Mercantile Exchange, July West Texas Intermediate (WTI) crude oil closed at $116.87 per barrel, up $1.61 (1.40%) from the previous session.

That day, OPEC+ held a regular meeting and agreed to increase production by 648,000 barrels per day in July and August. This is about 50% more than the previous increase.

This content was produced with the assistance of AI translation services.