Dow rises 450 points after strong GDP data as investors shake off ‘kicking teeth’ from Fed’s Powell

U.S. stocks recorded strong gains on Thursday morning, finding support after a much stronger-than-expected fourth-quarter economic growth and recovering from weakness in the previous session, prompted by central bank chairman Jerome Powell. Several interest hikes this year.

whats going on
  • Dow Jones Industrial Average DJIA,
    + 1.43%
    It was up 458.43 points, or 1.3%, at 34,626.52, after rising more than 600 points in its session in early action.

  • S&P 500 SPX,
    + 1.22%
    56.28 points or 1.3% to 4,406.21.

  • Nasdaq Joint COMP,
    + 0.80%
    Traded 109.24 points, or 0.8%, at 13,651.36.

On Wednesday, during Powell’s press conference, stocks dropped gains, largely down, the Dow fell 0.4% and the S&P 500 0.2%, while the Nasdaq compound made a small gain.

What drives markets

The U.S. economy grew rapidly before the rise of Omigran at the end of 2021. 6.9% year-on-year in the fourth quarter As consumers spent more, businesses re-stocked. According to a poll by The Wall Street Journal, GDP growth is expected to pick up to 5.5% in the fourth quarter, after slowing to 2.3% in the third quarter.

While strong economic data stimulate expectations, the central bank will be more aggressive in tightening policy, economists said, noting that inventory gains would be a key driver, without which the economy would expand at a rate of 1.9%. Moreover, rising commodities could be read as a sign of easing of supply-chain disruptions, which could ease inflationary pressures.

“The silver lining in today’s report is that the supply side of the economy is starting to catch up with demand, as demonstrated by the large inventory structure in Q4,” economists Aneta Markovska and Thomas Simons wrote in Jeffries. “Even though inventory volumes are still low, they are clearly infiltrated, which will soon begin to reduce inflation.”

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Although the report of the Federal Open Market Committee released on Wednesday afternoon did not surprise investors, the tone of Powell’s comments remained the same.

The head of the central bank did not reject the idea that the central bank could raise at every one of its meetings this year, and talked about the need to be “fast”. “There is little room to raise fees without affecting jobs,” he said.

Seema Shah, chief global strategist for leading global investors, called that notion of the ability of jobs to raise rates without affecting the market a “real kick to the market teeth”.

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Fed-futures on Thursday showed the Federal Reserve is likely to offer five 25-point-by-point rate hikes by the end of the year. Has risen by almost 33% From 22% on Tuesday, according to the CME FedWatch tool.

Powell refused to rule out the possibility of a half-percentage point more than a quarter-point in rates during the hiking cycle.

At Wednesday’s session, Stephen Gallo, European head of FX strategy for BMO capital markets, said in a note that “the stock market does not accept Powell’s attempt to retain maximum flexibility.”

Yield of 2-year treasury TMUBMUSD02Y,
The Fed was 1.036% five minutes before the close and 1.1711% on Thursday.

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Lawrence Dyer, head of HSBC’s US rating strategy, said Powell’s view that his key PCE inflation forecast had risen about 20 basis points since December was equivalent to a projected 30-point increase in the Fed-rate ratio.

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At the end of 2022, the Fed-futures futures are slightly higher than that, he said, adding that yields could turn upside down in the next few days.

In other US data, Orders for durable goods Unemployment benefits in the U.S. fell 0.9% in December, compared to expectations Dropped 30,000 last week Up to 260,000, disruptions in the labor market tied to Omigron are beginning to fade.

Home sale pending Fell 3.8% in December, According to the monthly index published by the National Real Estate Association.

Investors also faced a flood of earnings, while Apple Inc. AAPL,
+ 1.95%
Results should be provided upon completion of the closing hours.

Focusing companies
  • Electric car maker Tesla Inc. DSLA Late Wednesday, it issued a report that showed stronger gains than forecast Cautionary guidance In supply-chain snacks on microchips. The stock fell 6.9%.

  • Shares McDonald’s Corp.
    + 0.18%
    Fast food company reported fourth-quarter earnings and earnings for the quarter, down 0.8% Missed expectations.

  • Manufacturer of microchip equipment Lam Research Corp.
    Supply chain conditions said It got worse in late December. The stock fell 6.3%.

How other assets are traded
  • Yield of TMUBMUSD10Y 10 year treasury note,
    The 4 base points were down 1.801%. Yield and credit prices move in opposite directions.

  • ICE US Dollar Index DXY,
    + 1.26%,
    The currency against the basket of the six main competitors rose 1.4% to its highest level since July 2020.

  • Oil Futures CL.1,
    After hitting a seven-year high on Wednesday, the U.S. benchmark fell 0.2%. Gold Future GC00,
    Fell 1.8%, below the one-ounce limit of $ 1,800.

  • In European stocks, Stoxx Europe 600 SXXP,
    + 0.65%
    London FTSE 100 UKX, up 0.7%
    + 1.13%
    1.3% received.

  • Shanghai Joint SHCOMP,
    The Hong Cheng Index HSI fell 1.8%,
    Japan’s Nikkei 225 NIK fell 2%,
    Decreased by 3.1%.

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