Stocks rose on Thursday as investors bet that the Federal Reserve is nearing completion of its interest rate hike campaign and awaited new corporate results.
The tech-heavy Nasdaq (^IXIC) rose more than 1.1%. The S&P 500 (^GSPC) rose about 1%, while the Dow Jones Industrial Average (^DJI) gained about 0.9%.
All three major indicators closed with strong gains on Wednesday after the Fed kept interest rates at their highest in 22 years. The market’s general conclusion from Chairman Jerome Powell’s comments on the decision is that the Federal Reserve will leave interest rates unchanged in December.
Read more: What the Fed’s pause on rate hikes means for bank accounts, CDs, loans and credit cards
According to the CME FedWatch tool, traders now expect an 85 percent chance that there will be no further interest rate hikes from the Fed this year, compared to a 59 percent chance the day before the policymakers meet.
But JPMorgan Chase (JPM) CEO Jamie Dimon told Yahoo Finance that he believes the Federal Reserve could raise interest rates by another 75 basis points due to “more stubborn” inflation, saying: “I suspect that potentially is not the case.”
Attention is now turning more to earnings season, with Apple’s (AAPL) after-hours earnings report the highlight of a packed Thursday. The focus will be on the results of the iPhone situation in China and global consumer spending, following mixed reports from US tech giants.
Meanwhile, shares of Starbucks (SBUX) rose sharply in early trading after the coffee chain beat estimates for revenue and profit. Shopify (SHOP) said it returned to profit in the third quarter as it adopted AI, and its shares rose 15%.
JThe market’s statement of no further interest rate hikes is now a “consensus opinion”.
Federal Reserve Chairman Jerome Powell was careful not to shake the central bank’s hand as he discussed the path forward for interest rates.
“The slowdown, I think, gives us a better sense of how much more we need to do when we need to do more,” Powell said in a news conference Wednesday after the Fed decided to keep interest rates steady for the second straight day keep meeting.
The markets were not that volatile. Treasury yields, which often peak when the Fed’s interest rate peaks, hit their lowest level in two weeks on Thursday. The tech-heavy Nasdaq Composite, which often lags when there are fears of further tightening, rose more than 1% for a second straight day.
And direct bets on the Fed’s course are increasingly leaning toward no further rate hikes. The CME FedWatch tool now forecasts an 80% chance that the Federal Reserve will not raise interest rates again this year, up from a 54% chance a month ago.
“Certainly it’s a scenario that we could get more rate hikes, but I think the most likely scenario is that we’re done,” Mark Zandi, chief economist at Moody’s Analytics, told Yahoo Finance Live on Wednesday after Powell’s press report Rally of socks had triggered at the market close. “And I think today’s market action would suggest that the consensus view now prevails.”
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Stocks rise while yields fall
Investors piled into risk-on trades on Thursday as fears of another interest rate hike by the Federal Reserve were put to rest.
The tech-heavy Nasdaq, which has lagged in the past when investors feared a rise in interest rates, rose more than 1.2%. The S&P 500 (^GSPC) rose nearly 1%, while the Dow Jones Industrial Average (^DJI) gained nearly 0.7%.
Meanwhile, the 10-year Treasury yield fell to 4.62%, its lowest level in more than two weeks.
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Stock futures rise on hopes the Fed is done raising interest rates
Major U.S. stock indexes were poised to extend the previous day’s gains on Thursday as investors assessed Federal Reserve Chairman Jerome Powell’s comments following the central bank’s decision to keep interest rates stable.
Dow Jones Industrial Average futures (^DJI) rose 0.50%, or 168 points, while S&P 500 futures (^GSPC) rose 0.71%. Contracts on the tech-heavy Nasdaq 100 (^NDX) rose 1.09%.
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