U.S. stock markets regained momentum after closing sharply higher on Thursday. Dovish comments from the Fed Chairman and the ECB President regarding reduction of the benchmark interest rates significantly bolstered market participants confidence. All three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) increased 0.3% or 130.30 points to close at 38,791.35. Notably, 14 components of the 30-stock index ended in negative territory and 16 ended in positive zone. The major gainer of the blue-chip index was Intel Corp. (INTC – Free Report) after its stock price surged 3.7%. Intel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The tech-heavy Nasdaq Composite finished at 16,273.38, rising 1.5% or 241.83 points due to strong performance by technology bigwigs. In intraday trade, the tech-laden index posted a new all-time high of 16,309.02.
The S&P 500 was up 1% to finish at 5,157.36, marking a new closing high. In intraday trade, the benchmark index posted a new all-time high of 5,165.02. Nine out of 11 broad sectors of the broad-market index ended in positive territory while two in negative zone. The Materials Select Sector SPDR (XLB), the Communication Services Select Sector SPDR (XLC) and the Technology Select Sector SPDR (XLK) advanced 1.2%, 1.6% and 1.6%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 0.4% to 14.44. A total of 11.19 billion shares were traded on Thursday, higher than the last 20-session average of 12.06 billion. Advancers outnumbered decliners on the NYSE by a 3.09-to-1 ratio. On Nasdaq, a 1.55-to-1 ratio favored advancing issues.
Dovish Attitude of the Fed and ECB
The Fed Chairman Jerome Powell gave his testimony before the Senate after appearing before the House of Representatives a day before. On Mar 6, Powell said the central bank is likely to initiate interest rate cut this year but not any time soon. However, on Mar 7, he indicated that interest rate cuts may not be too far off if the inflation rate moves in line with the Fed’s expectations in near future.
Per Powell, “We’re waiting to become more confident that inflation is moving sustainably at 2%. When we do get that confidence, and we’re not far from it, it’ll be appropriate to begin to dial back the level of restriction.” The CME FedWatch currently shows a 74.6% probability of a 25-basis points rate cut in June FOMC meeting. The interest rate derivative tool also shows at least two more rate cuts of 25-basis points before the end of 2024.
The European Commercial Bank (ECB) maintained the key interest rate at existing 4%. However, the ECB staff projections for inflation in 2024 were updated to an average 2.3% from 2.7% projected earlier. The ECB expects inflation to hit its 2% target in 2025 and cooling further to 1.9% in 2026. Euro zone inflation lowered to 2.6% in February from 2.8% in January. The ECB President Christine Lagarde indicated for a possible rate cut in June meeting.
Economic Data
The Department of Labor reported that initial claims remained unchanged at 217,000 for the week ended Mar 2, in line with the consensus estimate. Previous week’s data was revised upward from 215,000 to 217,000.
Continuing claims (those who have already received government aids and reported a week behind) rose 8,000 to 1.906 million. The four-week moving average for claims, which helps adjust for weekly volatility, increased 10,250 to 1,888,250.
The U.S. trade deficits for goods and services in January came in at $67.4 billion, higher than the consensus estimate of $63.4 billion. December’s data was revised downward to a deficit of $64.2 billion from $62.2 billion reported earlier. January exports were $257.2 billion, $0.3 billion more than December exports. January imports were $324.6 billion, $3.6 billion more than December imports.
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