Wall Street’s major averages on Wednesday fell into the final hours of trading as stocks got caught in a late downdraft. Meanwhile, U.S. Treasury yields fell as investors increasingly believed the Fed would start cutting interest rates in the near future. A soft landing can be achieved.
Markets opened higher on the back of a second “Goldilocks” measure of GDP growth in the third quarter, but then Richmond Fed President Tom Barkin and JPMorgan (JPM) chief Jamie Dimon relinquished its gains after comments on the stock tempered some of the positive sentiment. After that, the three major averages remained stable above the flat line, but began to decline about an hour ago.
The Nasdaq Composite Index, which has a high proportion of high-tech stocks (COMP.IND) It was now 0.15% drop It rose to 14,260.87 points, up from an increase of nearly 1% earlier. The benchmark S&P 500 (SP500) is currently 0.07% decrease The blue-chip stock Dow rose to 4,551.48 points (DJI) was holding 0.03% increase It was 35,427.44 points.
Seven of the S&P’s 11 sectors were in negative territory, led by communications services. Real estate and finance were the sectors with the highest rates of increase.
The market is still on track for its best month since July 2022. This progress was driven by a general consensus that the Fed could finish raising rates and achieve a soft landing, an event that curbs inflation without hurting economic growth.
Expectations for such a soft landing were greatly strengthened before the opening bell when the Bureau of Economic Analysis released its second forecast for US third-quarter GDP growth, which was an annualized increase from +4.9% in the previous forecast. It has been revised upward to 5.2%. Additionally, the Fed’s preferred measure of inflation, the Core Personal Consumption Expenditures Price Index, was revised downward.
“Upward revisions to U.S. third-quarter growth contribute to a consistent 2023 storyline featuring repeated positive surprises that overturn previously pessimistic consensus forecasts for the global economy. extrapolation that could make the consensus forecast for 2024 overly optimistic,” said Mohamed El. – Allianz chief economic advisor Elian said on X (formerly Twitter).
Treasury yields fell as traders bought up bonds after the GDP estimate. Long-term 30-year bond yields (US30Y) fell 8 basis points to 4.44%, and 10-year bond yields (US10Y) fell 7 basis points to 4.26%. The interest rate-sensitive short-term two-year bond yield (US2Y) fell 9 basis points to 4.65%.
See live data on how Treasury yields are moving across the curve on the Seeking Alpha Fixed Income page.
GDP data also strengthened expectations for the Fed to cut interest rates. According to the CME FedWatch tool, the market currently sees a 44.46% chance that the central bank will cut key policy rates by 25 basis points in March next year (versus 34.61% the day before).
After the start of regular trading, the GDP-induced market rally was tempered somewhat by Jamie Dimon. Speaking at the annual New York Times Dealbook Summit, the veteran banking executive said he thinks a rate hike is more likely than others, but still sees a soft landing. Later, Richmond Fed President Tom Barkin argued at the CNBC Summit that the central bank should leave room for further rate hikes as inflation remains high.
The arrival of the Fed’s Beige Book report on regional activities gave market participants a better understanding of the state of the economy. The data showed that economic activity has slowed since the previous report.
Turning to Wednesday’s activity, NetApp (NTAP) was the top gainer in the S&P 500 (SP500) after Wall Street praised the data infrastructure company’s gross profit growth.
General Motors (GM) was also among the S&P’s top gainers after the automaker reinstated its earnings outlook and also announced a $10 billion stock buyback program and plans to increase its common stock dividend by 33%. did.