The US equities ended on a flat note on Wednesday, with investors eyeing Federal Reserve officials’ comments for signals regarding the expectations of interest rates. While performance on Wall Street was somewhat muted on Wednesday, the traders continue to look for the direction of Treasury yields. The US treasury yields saw a retraction since the benchmark 10-year Treasury yield touched ~5% in late October. This was seen after the comments from the US Fed’s officials and softer labour data. As a result of this drop, the global indexes saw a significant rally, with S&P 500 and NASDAQ seeing their longest streak of gains in around 2 years.
We believe that equity markets have priced in about ~50% chance of the rate cut of ~25 bps in early 2024 (i.e., when they meet in May 2024). Just a week prior, there was a ~41% chance of the rate cut. This improvement in the sentiments of the traders and experts have supported the performance on Wall Street.
That being said, the comments from numerous central bank officials in the previous few days continue to leave the door open for some more rate increases, resulting in some uncertainty among the investors. Traders and investors believe that, even in the worst-case scenario, there will be probably only 1 rate hike. Therefore, this optimism might prevail which should support equity markets.
Meanwhile, Chairman of US Fed didn’t comment on the monetary policy in opening remarks in the conference conducted on Wednesday. He is expected to provide views at another conference which has been scheduled for Thursday. On Wednesday, while Nasdaq Composite went up by 0.08% to 13,650.41, S&P 500 Index was up by 4.40 points or 0.10%. Most of this rally was seen in the final hour of trading.
Since overall performance on Wall Street has been discussed, let us now quickly have a look at the earnings data. Shares of Eli Lilly and Company saw an increase of ~3.2% after the U.S. Food and Drug Administration approved its weight loss treatment.
Elsewhere, Warner Bros Discovery ended lower after the company mentioned that Hollywood strikes and weak advertising market might impact its 2024 earnings. Shares of Take-Two Interactive Software ended higher post its announcement about the release of trailer in the next month about the latest installment in “Grand Theft Auto” videogame franchise.
Shares of the EV maker Lucid Group ended lower after the company trimmed its production forecast.
- Performance of NASDAQ: For how long investors can expect this rally to continue?
- Federal Reserve’s impact on different asset classes
- Sensex weekly wrap: Understanding what moved the markets and by how much?
- Stock market expectations for coming week: What lies ahead?
- Jobs report for October 2023: What recent trends showcase?