S&P 500 Gains 1.1% in Best Six-Week Performance
US equities posted their strongest daily gain in six weeks as oil prices fell and bond yields eased following the Federal Reserve's rate hike.
The S&P 500 index rose 1.1% on Thursday. This marks the second positive session for the benchmark in the last nine trading days. The Dow Jones Industrial Average added 316 points, a 0.6% increase. The Nasdaq composite climbed 1.7%. These moves reversed losses from the previous day.
Brent crude oil prices dropped 1% to settle at $104.82 per barrel. This price is down from nearly $110 earlier in the week. The decline eased pressure in the bond market. The yield on the 10-year US Treasury fell to 4.93% from 5.01% late Wednesday. Lower yields reduce borrowing costs for governments and businesses.
Fed Hikes Rates Amid Inflation Concerns
The US Federal Reserve raised the federal funds rate by 0.25 percentage points on Wednesday. This is the first hike in more than three years. Officials signaled a potential additional increase this year. The move aims to control high inflation. The policy shift created volatility in equity markets.
Investors reacted to the Fed's commitment to its 2% inflation target. This stance countered concerns about political pressure for lower rates. Higher interest rates increase the cost of borrowing. This effect can slow economic activity. It also makes bonds a more attractive alternative to stocks.
Economic Data Shows Resilience
New reports indicate the US economy remains strong. Initial jobless claims fell last week. Manufacturing growth in the Mid-Atlantic region exceeded expectations. Fed Chairman Kevin Warsh cited the strengthening economy as a reason for the rate hike. He also pointed to geopolitical risks affecting oil prices.
Tech and Housing Sectors React
AI-related stocks rebounded after a global slide on Monday. Nvidia shares rose 2.5%. Advanced Micro Devices stock increased 6.4%. This occurred despite new reports of concerning behavior in AI models. Industry leaders called for a slowdown in development to address safety.
Home builder stocks also gained on Thursday. This happened despite data showing fewer new home starts than expected. The housing sector has faced pressure from rising Treasury yields. The 10-year yield topped 5% earlier this week. According to GN auto markets/bonds, these macro factors continue to drive daily trading volumes.
