- The Bank of England surprised interest rates by 50 basis points
- Accenture slips after dismal quarterly revenue guidance
- Spirit AeroSystems drops due to production halt, weighing on Boeing
- Indices: Dow down 0.01%, S&P up 0.37%, Nasdaq up 0.95%
June 22 (Portal) – The S&P 500 and Nasdaq closed higher on Thursday as Federal Reserve Chair Jerome Powell continued to beat the hawkish drum, suggesting the central bank has not yet reached the end of its tightening cycle, but has assured that the Fed would proceed with caution.
The tech-heavy Nasdaq’s robust rise was fueled by momentum stocks led by Amazon.com (AMZN.O), Apple Inc (AAPL.O) and Microsoft Corp (MSFT.O), while the S&P 500’s rise was more modest.
Industrials (.SPLRCI) and Financials (.SPSY) kept the blue chip Dow essentially flat.
“Investors are playing tug-of-war like pulling petals out of a daisy and saying, ‘bull market, no bull market,'” said Sam Stovall, chief investment strategist at CFRA Research in New York. “We don’t have much to trade, the second quarter results don’t start in a couple of weeks.”
Powell, appearing before the Senate Banking Committee for his semi-annual monetary policy testimony, reiterated his view that further rate hikes are likely in the coming months, a view echoed earlier in the meeting by Fed Governor Michelle Bowman.
“The market expects the Fed to hike rates one more time rather than twice as suggested in the post-FOMC summary,” Stovall added. “Moreover, yesterday and today, Powell reiterated that they will depend on data and that Wall Street expects inflation to cool faster and unemployment to rise more rapidly, which is what the Fed intended with its rate hikes.”
Investors were surprised when the Bank of England implemented a larger-than-expected 50 basis point rate hike to counter stubborn UK inflation. This is further evidence that strong price growth continues to be a headwind for the global economy.
According to CME’s FedWatch tool, on the face of it, financial markets have priced in a 77 percent chance of another 25 basis point rate hike by the close of the July Fed meeting.
On the economic front, jobless claims held steady at a 20-month high and the Conference Board’s Leading Economic Index posted its 14th straight monthly decline, suggesting the Fed’s efforts to slow the economy are beginning to hit their intended target to show effect.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 30, 2023. Portal/Brendan McDermid/File Photo
The Dow Jones Industrial Average (.DJI) fell 4.81 points, or 0.01%, to 33,946.71, the S&P 500 (.SPX) was up 16.2 points, or 0.37%, to 4,381.89 and the Nasdaq Composite (.IXIC) is up 128.41 points, down 0.95% to 13,630.61.
Of the 11 major sectors in the S&P 500, five ended the session higher, with consumer discretionary (.SPLRCD) posting the largest percentage gain.
Real estate (.SPLRCR) and energy (.SPNY) posted the largest declines.
Spirit AeroSystems (SPR.N) tumbled 9.4% after the aircraft supplier said it would halt production at its Wichita, Kansas, plant after workers announced a strike beginning June 24.
Boeing (BA.N) shares fell 3.1%.
US-listed Accenture fell 1.9% after the IT consultancy forecast weaker-than-expected fourth-quarter revenue.
Olive Garden’s parent company, Darden Restaurants (DRI.N), issued a disappointing full-year earnings outlook on rising commodity prices. Its shares fell 2.6%.
Declining issuance outpaced rising issuance by a ratio of 2.17 to 1 on the NYSE; On the Nasdaq, a 1.62-to-1 ratio favored the losers.
The S&P 500 posted 16 new 52-week highs and 5 new lows; The Nasdaq Composite posted 55 new highs and 118 new lows.
Volume on US exchanges was 9.60 billion shares compared to the average of 11.37 billion for the entire session over the last 20 trading days.
Reporting by Stephen Culp; Additional reporting from Shubham Batra, Shristi Achar A and Medha Singh in Bengaluru; Edited by Aurora Ellis
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