FILE – Wednesday, June 29, 2022, at the New York Stock Exchange in New York. (AP Photo/Julia Nickinson, File)
NEW YORK (AP) — Wall Street rose Thursday to pare deep September losses after some pressure on Wall Street eased from oil and bond markets.
The S&P 500 rose $25.19, or 0.6%, to 4,299.70. The Dow Jones Industrial Average rose 116.07 points, or 0.3%, to $33,666.34, and the Nasdaq Composite Index rose 108.43 points, or 0.8%, to 13,201.28.
A day after oil prices reached their highest level this year, the drop in oil prices has cooled down the stock market a bit. Treasury yields also eased to give stock markets, especially big tech companies, some breathing space.
Meta Platforms’ 2.1% rise and Nvidia’s 1.5% rise were two of the strongest factors pushing the S&P 500 higher.
But stocks still suffered their worst month of the year as Wall Street grapples with a new normal in which interest rates could remain high for some time. The Federal Reserve has lowered its key interest rate to its highest level since 2001 in an effort to tame high inflation, and last week suggested it may cut less next year than initially expected.
This is a big departure from the past for investors who expected the Fed to cut rates quickly and significantly whenever the situation got dicey. Low interest rates can disrupt financial markets, but high interest rates intentionally slow the economy and cause the prices of stocks and other investments to fall.
The threat of higher long-term interest rates has sent U.S. Treasury yields soaring in the bond market. The yield on the 10-year U.S. Treasury rose above 4.67% in the morning, near its highest level since 2007, but has since fallen to 4.57% from 4.61% late Wednesday.
The yield on the two-year Treasury note, driven largely by expectations for Fed action, fell to 5.06% from 5.14%.
Yields rose in waves following the latest round of reports on the economy.
One official said fewer workers applied for unemployment benefits last week than economists expected. This is the latest sign that the job market is strong, helping the economy avoid a recession, but could also put upward pressure on inflation.
A separate report said the U.S. economy grew at an annual rate of 2.1% in the summer, after some revisions to earlier forecasts. Although this was lower than economists expected, economic growth appears to have remained steady through at least the third quarter. The question is how this trend will play out in his final three months of the year.
Overall, these reports have done nothing to change investors’ minds about the Fed continuing to take a tough stance on interest rates, what Wall Street calls a “hawkish” stance on policy.
“The waiting game continues,” said Mike Loewengert, head of model portfolio construction at Morgan Stanley Global Investment Office.
“Until there is a clear break from this holding pattern, investors will likely endure a hawkish Fed, higher long-term interest rates, and perhaps more market volatility,” he said.
Beyond the long-term threat of higher interest rates, there are many challenges looming for the economy and Wall Street.
The most pressing concern is the threat of another U.S. government shutdown as early as this weekend, but financial markets have held up fairly well during past government shutdowns.
The fall in oil prices has eased another threat somewhat. Benchmark US crude oil fell by $1.97 per barrel to settle at $91.71. The price is still up significantly from below $70 in the summer, raising concerns about inflation. Brent crude oil, the international standard crude oil, also fell by more than $1 per barrel.
On Wall Street, online stationary bike and fitness company Peloton Interactive soared 5.4% after announcing a five-year partnership with sportswear maker Lululemon Athletica.
Trimble rose 6.5% after announcing it would acquire $2 billion in cash and a 15% stake in a joint venture with agricultural machinery company AGCO. Trimble will contribute much of its precision agriculture business to the joint venture. AGCO rose 2.8%.
A loser on Wall Street, Micron Technology fell 4.4% despite reporting better results than analysts expected in the latest quarter. Future profitability outlook was lower than some analysts expected.
In overseas stock markets, the Hang Seng exchange rate in Hong Kong fell 1.4% due to the suspension of stock trading in real estate developer China Evergrande Group. The company announced that it had been informed by authorities that its chairman, Hui Kar Yang, was being subject to “enforcement measures based on the law due to suspicions of illegal crimes.”
Evergrande is the world’s most indebted property developer and is at the center of a property market crisis that is dragging down China’s economic growth.
AP Business writers Yuri Kageyama and Matt Ott contributed.
Stan Cho, Associated Press
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