The hot-stocks market witnessed significant gains on Thursday as Wall Street celebrated robust profit reports from major companies and received positive signals that the economy is showing resilience against a potential recession in the emerging stock market.
The S&P 500 climbed 0.5% in afternoon trading, reaching its highest level in almost 16 months. The Dow Jones Industrial Average rose 91 points, or 0.3%, to 35,618, on track for its 14th consecutive gain. The Nasdaq composite led the pack with a 1% gain, driven by Meta Platforms’ strong profit report.
Meta Platforms’ Earnings Beat Expectations, Driving Nasdaq to Lead the Market
Meta Platforms, the company behind Facebook, Instagram, and WhatsApp, outperformed analysts’ expectations as its services attracted more active members. The hot-stock surged 5.6%. Meanwhile, McDonald’s buoyed the Dow with better-than-forecasted profits during the spring, driving its stock up 2.1%.
In the bond market, Treasury yields increased after reports indicated the economy’s strength surpassed expectations. Economic growth accelerated in the spring, surpassing forecasts, and inflation was not as high as projected from April to June. Additionally, jobless benefit applications decreased, reflecting the robustness of the job market. Moreover, orders for long-lasting manufactured goods exceeded expectations.
Federal Reserve’s Rate Hike and Future Expectations Fuel Stock Market Index
Despite the Federal Reserve raising its federal funds rate, investors remain hopeful that the economy will avoid a recession despite higher interest rates. Fed Chair Jerome Powell indicated that further rate increases would depend on future reports about inflation and the economy, sparking optimism among traders that the recent increase may be the last of the current cycle.
Investors’ optimism has particularly boosted technology and high-growth stocks, with Big Tech companies like Nvidia, Amazon, and Apple leading the market’s ascent. The prospects of a “soft landing” for the economy, where high inflation returns to the Fed’s target without causing a painful recession, have fueled the market’s surge of the most volatile stocks this year.
Bond Market Reacts to Increased Treasury Yields Impacting Mortgages and Loans
While critics warn that the market may have moved too swiftly and that challenges may lie ahead in controlling inflation, Thursday’s trading demonstrated an overwhelmingly positive sentiment. European stock markets also experienced gains after the European Central Bank raised interest rates and left the possibility of further increases unanswered. The French CAC 40 surged 2.1%, and Germany’s DAX climbed 1.7%.
Asian stock indexes mostly followed suit, with Hong Kong’s Hang Seng leading the pack with a 1.4% rally.
Despite the positive hot-stocks sentiment, the bond market saw the 10-year Treasury yield rise to 3.98% from 3.87% late Wednesday, impacting rates for mortgages and other significant loans. The two-year Treasury yield, influenced by expectations for the Fed, rose to 4.95% from 4.85%.
