Nasdaq jumps 2% as stocks stage a rebound following Powell's outlook for bigger rate hikes
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- Major indexes rose Tuesday after ending a four-session run of gains on Monday.
- Investors appeared to take in stride Fed Chairman Powell's signal in the previous session to expect at least one rate hike of 50 basis points.
- Nike, Tesla and Moderna were winners in Tuesday's session.
Stocks closed higher Tuesday, with tech stocks winning back losses incurred the previous session after Federal Reserve chief Jerome Powell signaled that bigger rate hikes from the central bank are likely on the way as it battles high inflation.
Wall Street's key stock benchmarks finished higher after Monday's session snapped a run of losses. Those losses occurred after Powell told the National Association for Business Economics that there is potential for a rate hike of 50 basis points as "inflation is much too high."
The tech-concentrated Nasdaq Composite popped up 2% during Tuesday's trade. Winners included Tesla and Moderna, with the biotech firm aiming to expand the use of its COVID-19 vaccine to other illnesses.
"It didn't take long for investors to get over the latest disappointment as they prepared for interest rates rising to around 2% by the end of the year. That's an incredible aggressive tightening cycle and would mean at least one 50 basis point hike at a meeting, something we haven't seen in more than 20 years," said Craig Erlam, senior market analyst at Oanda, in a note Tuesday.
Goldman Sachs said Tuesday it now expects the Fed to raise interest rates by 50 basis points at both the May and June meetings. Consumer price inflation hit a fresh 40-year high of 7.9% in February.
"It didn't take long for investors to get over the latest disappointment as they prepared for interest rates rising to around 2% by the end of the year. That's an incredible aggressive tightening cycle and would mean at least one 50 basis point hike at a meeting, something we haven't seen in more than 20 years," said Craig Erlam, senior market analyst at Oanda, in a note Tuesday.
Here's where US indexes stood at 4:30 p.m. on Tuesday:
- S&P 500: 4,511.81, up 1.13%
- Dow Jones Industrial Average: 34,807.86, up 0.74% (254.87 points)
- Nasdaq Composite: 14,108.82, up 1.95%
With investors pricing in more rate hikes, a selloff in the bond market continued and pushed the 10-year Treasury yield to a 2019 high of 2.359%. The 10-year yield later pared its gain, rising eight basis points to 2.379%.
"Despite recession talk rearing its ugly head as people question whether the economy can withstand such a rapid tightening, it's clear that investors are not being deterred," Erlam wrote. "Powell certainly seems to believe the economy can withstand such a sharp increase in interest rates. Maybe investors share his optimism."
The consumer discretionary and communication services group led gains on the S&P 500 Index. The S&P 500 and the Nasdaq Composite on Monday broke four straight days of gains.
Among Dow industrials on Tuesday, Nike climbed after the athletic apparel maker's fiscal third-quarter earnings and sales jumped above expectations. The average had a five-session winning streak going that ended Monday.
Alibaba stock soared after the Chinese e-commerce heavyweight announced its biggest-ever share buyback program of $25 billion.
JPMorgan's quant guru Marko Kolanovic slightly tempered his bullishness on stocks Monday, lowering his S&P 500 year-end price target to 4,900 from 5,050 in the face of geopolitical and macro risks.
Oil prices slipped. West Texas Intermediate crude lost 0.7% to $111.30 per barrel. Brent crude, the international benchmark, slipped 0.4% to $115.08.
Gold futures gave up 0.4% to $1,921.90 per ounce. Bitcoin gained 3.2% to $42,597.16.
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