NEW YORK, Feb 3 — A gauge of global stocks climbed for a third straight day and longer-dated US Treasury yields were flat yesterday, as policy announcements from a host of central banks added to optimism that the cycles of interest rate hikes may be near an end.
After the US Federal Reserve raised rates by 25 basis points (bps) on Wednesday, as was widely expected, markets rallied following comments from Fed Chair Jerome Powell acknowledging the “disinflationary” process may have begun.
The European Central Bank (ECB) and Bank of England (BoE) hiked by 50 basis points each yesterday, with the BoE signaling the tide was turning against inflation and the ECB indicating at least one more hike was on the horizon.
On Wall Street, the S&P 500 and Nasdaq rallied, with the S&P 500 closing at its highest intraday level since August 19 and the Nasdaq closing at its highest since September 12, getting an additional boost from a 23.28 per cent surge in Facebook parent Meta Platforms Inc META.O, its biggest daily percentage jump since July 25, 2013, following its quarterly results and US$40 billion buyback announcement. That helped the S&P communication services sector .SPLRCL jump 6.74 per cent, its biggest daily percentage gain since March 13, 2020.
“The reaction to yesterday’s Fed comments really encouraged investors to go risk-on,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
“The bottom line for investors, I think, is that the Fed’s comments were unexpected.”
The Dow Jones Industrial Average .DJI fell 39.02 points, or 0.11 per cent, to 34,053.94 while the S&P 500 .SPX gained 60.55 points, or 1.47 per cent, to 4,179.76 and the Nasdaq Composite .IXIC added 384.50 points, or 3.25 per cent, to 12,200.82.
On the economic front, weekly initial jobless claims dropped to a nine-month low, showing the labour market remains strong, while worker productivity in the fourth quarter accelerated. Investors will eye the January payrolls report today for further signs of labour market strength.
With 46 per cent of the S&P 500 having reported results, earnings for the quarter are expected to decline 2.4 per cent from the year-ago period, according to Refinitiv data, compared with a 1.6 per cent expected decline at the start of the year.
After the closing bell, Amazon shares lost 6.56 per cent and Google parent Alphabet GOOGL.O dropped 6.09 per cent after their quarterly results.
European stocks also jumped, with the STOXX 600 closing at its highest level since April 21 as it notched its biggest one-day percentage gain in a month.
The pan-European STOXX 600 index rose 1.35 per cent and MSCI’s gauge of stocks across the globe gained 1.12 per cent. The MSCI index hit its highest intraday level since May 5 and was on track for its ninth gain in the past ten sessions.
Benchmark 10-year notes were unchanged to 3.398 per cent, reversing an earlier move lower.
The dollar bounced, however, from its biggest one-day percentage drop in nearly a month on Wednesday, while the euro and sterling weakened following the ECB and BoE announcements.
The dollar index rose 0.773 per cent, with the euro EUR= down 0.73 per cent to US$1.0909.
The Japanese yen strengthened 0.21 per cent versus the greenback at 128.67 per dollar, while sterling was last trading at US$1.2228, down 1.20 per cent on the day.
In commodities, the dollar strength served to dent oil prices, with US crude settling down 0.69 per cent at US$75.88 per barrel and Brent settled at US$82.17, down 0.81 per cent on the day. — Reuters
