Stocks surged to close out the trading week on Friday after a report said the Federal Reserve will likely debate on a smaller interest rate hike in December, raising hopes the central bank may be poised to adopt a less aggressive policy stance.
The Dow Jones Industrial Average surged 748.97 points, or 2.5%, to 31,082.56, while the S&P 500 jumped 2.4%.
The Nasdaq climbed 2.3%. All three indexes rose nearly 5% for the week, notching their biggest weekly percentage gains in four months.
Some Fed officials have begun sounding out their desire to slow down the pace of increases soon, according to the Wall Street Journal, and how to signal plans to approve a smaller increase in December.
“You had the (report) and then you had some confirmation that 75 seems to be pretty baked in for November here but perhaps there is room to slow and extend… rather than front-load so high and then have to peel off, you kind of ease to your 4.75% or 5% peak,” said Tom Hainlin, senior investment strategist at U.S. Bank Wealth Management in Minneapolis, Minnesota.
“Then maybe just hold there for a while so you are getting a little bit of relief.”
Stock markets have been hammered by worries of aggressive rate-hiking cycle tipping the US economy into a recession, with the benchmark 10-year US Treasury yield hitting fresh 15-year highs earlier in the session.
Traders are still widely expecting a fourth 75-basis-point hike at the central bank’s November meeting.
Meanwhile, Snap plummeted 28% after posting its slowest quarterly revenue growth in five years as advertisers cut spending due to inflation and geopolitical woes.
Other companies that rely heavily on ad revenue such as Meta Platforms fell 1.2%.
“It’s not uncommon for companies to cut back on advertising spending during concerns of an economic slowdown,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
“Right now you don’t want to be in a Snap or a Meta, and it’s probably going to transfer over to Alphabet.”
The third-quarter reporting season so far has been better-than-feared, prompting analysts to raise earnings expectations for S&P 500 companies to a 3.1% increase from 2.8% earlier in the week, according to Refinitiv data.
It is still well below the 11.1% rise that was forecast at the start of July.
Following the earnings-driven gains from earlier this week, the S&P 500 and the Nasdaq are set for their best week in six, while the Dow eyed its biggest weekly gain since late June.
Source link: https://nypost.com/2022/10/21/dow-rallies-on-hopes-of-smaller-fed-rate-hikes/