Wall St edges higher as investors digest cbank comments
By Amruta Khandekar and Shristi Achar A
November 8, 2023 – 3:25 PM UTC
(Reuters) – Wall Street’s main indexes inched higher on Wednesday as investors parsed earnings reports and comments from Federal Reserve officials for clues on how long the U.S. central bank will keep interest rates high and eventually start cutting it.
Treasury yields have retreated sharply from their highs amid expectations that the Fed has reached the end of its rate-hike campaign, helping the S&P 500 and the Nasdaq notch their longest streak of gains in two years on Tuesday.
Markets are now pricing in rate cuts as soon as in May, according to the CME Group’s FedWatch tool, with odds of a cut of at least 25 basis points having risen to nearly 49%, compared with about 41% a week earlier.
“There is an inherent optimism in capital markets because most investors are anticipating that the Fed will probably not raise interest rates anymore through the end of the year,” said Peter Andersen, founder of Andersen Capital Management in Boston.
“(This) can set the stage for a very strong rally as we finish up the fourth quarter.”
Still, cautious comments from several central bank officials over the past few days have kept investors on edge, with Fed Governor Michelle Bowman flagging the possibility of further rate hikes given the strength of the U.S. economy.
Meanwhile, Fed Chair Jerome Powell did not comment on monetary policy in opening remarks to the U.S central bank statistics conference. The Fed chair is scheduled to speak at another conference on Thursday.
The benchmark U.S. 10-year Treasury yield edged lower to 4.5522%, coming further off the 5% level breached in October.
Analysts have mixed views about the outlook for equities towards the end of the year, with some cautiously optimistic about the prospects of a rally, while others have highlighted the likelihood of economic growth concerns and tepid earnings forecasts keeping sentiment subdued.
On the earnings front, eBay shed 5.5% as the e-commerce platform forecast fourth-quarter revenue and profit below Wall Street estimates.
Under Armour (UAA.N) added 4.8% on raising its annual gross margin forecast.
Warner Bros Discovery(WBD.O) slumped 14.4% after the company said Hollywood strikes and a weak advertising market could hurt next year’s earnings.
Seven of the 11 major S&P 500 sectors rose, with information technology (.SPLRCT) leading gains, up 0.6%.
At 9:59 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 76.60 points, or 0.22%, at 34,229.20, the S&P 500 (.SPX) was up 9.54 points, or 0.22%, at 4,387.92, and the Nasdaq Composite (.IXIC) was up 22.89 points, or 0.17%, at 13,662.74.
Among other movers, Take-Two Interactive Software (TTWO.O) rose 7.2% on a report stating its Rockstar Games unit plans to announce the next “Grand Theft Auto” game as early as this week.
Electric vehicle maker Lucid Group (LCID.O) fell 6.2% after trimming its production forecast.
Advancing issues outnumbered decliners by a 1.31-to-1 ratio on the NYSE and by a 1.08-to-1 ratio on the Nasdaq.
The S&P index recorded 14 new 52-week highs and four new lows, while the Nasdaq recorded 31 new highs and 75 new lows.
Reporting by Amruta Khandekar and Shristi Achar A; Editing by Anil D’Silva and Maju Samuel
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What is the current market expectation for interest rate cuts and how is this affecting investor sentiment?
Wall Street’s main indexes experienced slight gains on Wednesday as investors analyzed earnings reports and statements from Federal Reserve officials. Investors are watching for indications of how long the Federal Reserve will maintain high interest rates before starting to cut them. The recent retreat in Treasury yields has contributed to the S&P 500 and Nasdaq recording their longest streak of gains in two years.
Market expectations now include pricing in rate cuts as early as May, with the odds of a cut of at least 25 basis points rising to nearly 49% compared to 41% a week earlier, according to the CME Group’s FedWatch tool. Many investors anticipate that the Fed will refrain from raising interest rates further by the end of the year, which fosters optimism in capital markets and could set the stage for a strong rally in the fourth quarter.
However, cautious statements from several central bank officials have kept investors on edge. Fed Governor Michelle Bowman noted the possibility of further rate hikes due to the strength of the US economy. Meanwhile, Fed Chair Jerome Powell did not comment on monetary policy during his opening remarks at the US central bank statistics conference. Powell is scheduled to speak at another conference on Thursday.
The benchmark US 10-year Treasury yield has edged lower to 4.5522%, moving further away from the 5% level breached in October. Analysts have mixed views regarding the outlook for equities towards the end of the year. Some are cautiously optimistic about the prospects of a rally, while others highlight concerns about economic growth and tepid earnings forecasts that may keep sentiment subdued.
On the earnings front, eBay experienced a 5.5% drop as the e-commerce platform forecasted revenue and profit for the fourth quarter below Wall Street estimates. Conversely, Under Armour rose by 4.8% after raising its annual gross margin forecast. Warner Bros Discovery slumped by 14.4% after warning that Hollywood strikes and a weak advertising market could impact next year’s earnings.
Most of the major S&P 500 sectors rose, with information technology leading the gains at 0.6%. At the time of writing, the Dow Jones Industrial Average was up 76.60 points, or 0.22%, the S&P 500 was up 9.54 points, or 0.22%, and the Nasdaq Composite was up 22.89 points, or 0.17%.
Among other movers, Take-Two Interactive Software rose by
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