Wall Street is beingdriven by significant increases in interest rates from XL.
The eagerly anticipated interest rate increase took a significant leap. Initially, American investors showed a touch of surprise, but optimism bloomed post-incident. Particularly fragile tech stocks experienced a surge.
US stock exchanges concluded with robust gains in the late hours. The Dow Jones Index and the S&P-500 reached unprecedented record highs. The Dow Jones Index ended 1.3 percent higher at 42,025 points. The S&P-500 climbed 1.7 percent, while the Nasdaq Composite soared 2.5 percent. On the day, 2,217 (Mon: 1,289) stocks showed profits and 612 (1,470) showed losses. 47 (99) stocks remained unaltered.
Following a minor negative response of the indices the day before to the interest rate reduction by the US Federal Reserve, a positive view now dominates, as per reports from the trading floor. The Federal Reserve slashed the primary interest rate by 50 basis points, which many market participants initially viewed as abrupt and sparked speculation about whether the central bankers may have been anxious about a deteriorating economy. Doubts were also raised that rapid interest rate reductions could eventually ignite inflation. However, Federal Reserve Chair Jerome Powell clarified during the Q&A session after the interest rate determination that he did not detect any signs of significant challenges in the US economy. He also expressed confidence that inflation can be reined in.
Economic figures present a rosy picture of the US economy
The Fed has demonstrated its readiness to maintain economic growth, said Jan von Gerich, chief analyst at Nordea. This could curb any negative reaction to poor data, primarily concerning the labor market, which has been aconcern for the markets.
The economic statistics published on Thursday indicate that the economy is not in dire straits. The number of first-time jobless claims fell more than anticipated last week - and from already low levels. The Philadelphia Fed Index recovered more than expected in September and entered positive territory. The trade deficit in the second quarter was larger than anticipated, but the statistics are already outdated. The index of leading indicators for August was consistent with expectations. The August figures on existing home sales came in slightly below expectations.
Nvidia and AMD with strong gains
The Fed's interest rate reduction particularly stimulated interest-sensitive tech stocks, and especially the struggling chip sector: Nvidia ascended by 4.0 percent, AMD by 5.7 percent, Intel and Micron increased 1.8 and 2.2 percent respectively.
AT&T dropped by 1.7 percent. The telecommunications company has agreed to eliminate eight miles of lead-sheathed cables from Lake Tahoe, a lake in the Sierra Nevada, after a prolonged legal dispute with environmentalists. Mobileye's stock skyrocketed by 15 percent. Majority shareholder Intel has reported no plans to sell its stake in the self-driving firm specializing in Mobileye at the moment.
The foreign exchange market witnessed the dollar strengthen slightly, but it subsequently relinquished these gains. The dollar index ultimately closed virtually unchanged. The unexpectedly large interest rate cut did not really surprise, according to foreign exchange analysts at Unicredit, attributing the greenback's reaction. Moreover, Powell made it clear that the Fed would not maintain this pace. All the while, the British pound appreciated against the dollar following the Bank of England's decision to keep its policy rate unchanged. The BoE argued that monetary policy must remain tight until inflation risks have subsided. This contrasts with the Fed's approach.
On the bond market, yields rose slightly, underpinned by recent economic data. The yield on ten-year notes increased by 1.7 basis points to 3.72 percent.
On the oil market, prices bounced back from the previous day's losses following the rate decision. Prices for WTI and Brent crude climbed by up to 1.6 percent. Market participants also drew attention to the risk of heightened conflict in the Middle East following the mass explosion of communication devices. The gold price also benefited from the rate cut and the prospect of further declining rates. The price of an ounce of gold surged significantly by 1.2 percent.
For more information on today's market activity, see here.
The positive sentiment towards the interest rate reduction led to increased investor confidence in the economy. Consequently, the economy, as represented by indicators like the Dow Jones Index and S&P-500, showed significant growth.
The Fed's decision to lower interest rates boosted the performance of interest-sensitive stocks, such as Nvidia and AMD, which experienced notable gains.
