NASDAQ 100, Dow Jones, S&P 500: Dow Jones Surges Over 350 Points, S&P 500 Hits 13-Month High

Highlights

• Dow Jones surges as investors digest Fed’s rate hike pause.
• Tech stocks continue to lead the market rally.
• S&P 500 achieves highest levels in over a year.

Overview

On Thursday, the Dow Jones Industrial Average experienced a strong rally, surging over 350 points, while the S&P 500 reached a new 13-month high. Investors interpreted the pause in the Federal Reserve’s rate-hiking campaign, following ten consecutive increases, as an indication that the central bank was nearing the end of its tightening cycle. This sentiment drove the market’s optimism, with tech stocks continuing to lead the upswing in line with the trend observed on Wall Street throughout 2023. Furthermore, the S&P 500 achieved its highest intraday levels since April 2022, marking its best week since March.

Fed Policy

During a press conference, Federal Reserve Chair Jerome Powell stated that the Federal Open Market Committee would assess the cumulative impact of tightening monetary policy in the six weeks leading up to its next meeting. While a decision on the policy move in July was yet to be made, Powell emphasized that the central bank would likely raise rates further this year, maintaining a data-dependent approach on a monthly basis. Powell’s comments on Wednesday caused some volatility in the stock market, but Thursday’s upswing demonstrated investors’ willingness to navigate the uncertain landscape ahead of the July FOMC meeting.

Economic Data

Investors and policymakers gained better insights into the labor market and consumer spending through additional economic data releases on Thursday. Weekly jobless claims slightly exceeded estimates, standing at 262,000 compared to the expected 245,000. Meanwhile, retail sales experienced a slight increase of 0.3%. These numbers, including unexpected growth in U.S. retail sales in May, provided support for the economy in the current quarter. The reassessment of expected interest rates in the rate market was encouraging, but the equity market largely disregarded this trend, continuing its rise based on the belief that the Fed was approaching the end of the rate hike cycle.

Sector & Stock Performances

Energy stocks led the gains among the 11 major S&P 500 sectors, with a 1.4% increase, largely influenced by higher crude prices. In the tech sector, shares of Microsoft and Oracle rose over 2%, while Alibaba stock climbed 2.1%. On the other hand, Kroger Co experienced a decline of 3.9% as it missed first-quarter revenue estimates. In contrast, Kohl’s Corp received an upgrade from TD Cowen, causing its stock to rise by 3.1%. The key question now is whether value and cyclical stocks can catch up to the growth and tech sectors, as this momentum could contribute to further market gains.

Overall Performance

The S&P 500 and Nasdaq reached their highest intraday levels since April 2022, with the S&P 500 also achieving its longest winning streak since November 2021. Year to date, the S&P 500 has risen by 14%, while the tech-heavy Nasdaq benchmark has gained over 30% in 2023.

The market’s positive sentiment has been fueled by the belief that the Federal Reserve is nearing the end of its rate hike cycle, although the central bank indicated potential rate increases later this year. Nevertheless, the equity market has largely ignored the rate market’s reassessment of expected interest rates, maintaining an upward trend.