Big Tech Leads Stock Rebound Despite Inflation Concerns: Markets Recap: Stocks surged in a volatile session led by gains
in major technology companies as investors navigated through unexpectedly strong inflation data.
Despite initial declines fueled by concerns over the latest Consumer Price Index (CPI) report,
Wall Street saw a notable recovery, with significant indices erasing earlier losses.
Traders are betting on a modest Federal Reserve rate cut next week,
highlighting the ongoing balancing act between inflationary pressures and market expectations.
Content
Technology Stocks
Analysts’ Insights
Market Performance
Core Inflation
Fed Decision
Market Data
Big Tech Leads Stock Rebound Despite Inflation Concerns
A rally in the shares of the world’s largest technology companies sparked a stock market comeback,
with the S&P 500 rising 1.1% and the Nasdaq 100 gaining 2.2%.
This marked the first instance since October 2022, where both indices erased intraday losses of at least 1.5%.
Chipmakers led the way, highlighted by an 8.2% jump in Nvidia Corp.
Treasury two-year yields increased on expectations that the Federal Reserve will gradually cut rates,
with traders now banking on a quarter-point reduction next week.
Analysts’ Insights on Market Recovery
Fawad Razaqzada of City Index and Forex.com noted,
“Stocks bounced back after the initial post-CPI drop as dip-buyers once again stepped in.
Still, September has historically been challenging for the stock market,
and it could prove to be the case again as we head deeper into the month.”
Skyler Weinand of Regan Capital added that smoother trading could be expected post-Fed cut and elections as uncertainty diminishes.
Jose Torres of Interactive Brokers highlighted,
“Stock bulls should favor a slow and controlled vertical walk down
the monetary policy stairs rather than a speedy and turbulent roll south to lower stories.
The former scenario aligns with soft landings and earnings buoyancy,
while the latter often occurs during economic slowdowns and declining profits.”
Market Performance Highlights
The S&P 500 closed near 5,554 points, with the “Magnificent Seven” megacap index rising 2.6%.
The Dow Jones Industrial Average gained 0.3%, and the Russell 2000 Index added 0.3%.
Notably, International Business Machines Corp. reached an all-time high,
and OpenAI is reportedly in discussions to raise $6.5 billion at a $150 billion valuation.
Treasury 10-year yields increased by one basis point to 3.66% while the dollar weakened.
Oil prices climbed as Hurricane Francine disrupted significant oil-producing
regions in the Gulf of Mexico, prompting traders to cover bearish positions.
Core Inflation Accelerates in the US
Core US inflation, which excludes food and energy costs, rose 0.3% in July,
marking the most significant increase in four months, with a 3.2% annual rise.
According to Bloomberg, the three-month annualized rate accelerated to 2.1%,
up from 1.6% in July. Seema Shah of Principal Asset Management remarked,
“This isn’t the CPI report the market wanted to see.
The number is certainly not an obstacle to policy action next week,
but hawks on the committee will likely use today’s CPI report as evidence
that the last mile of inflation must be handled carefully and cautiously.”
Shifts in Focus as Fed Decision Looms
David Russell at TradeStation observed that while the latest inflation numbers aren’t “run away dovish,”
they confirm the ongoing cooling of inflation.
He suggested that market attention could shift from the Fed
as a primary catalyst toward earnings reports and the upcoming election cycle.
Krishna Guha of Evercore noted,
“The firmer-than-expected core inflation print will make it harder for Jerome Powell to deliver
a 50 basis-point cut in September. We think a starter 50 basis-point cut is the right play,
but the odds have moved against this, increasing risks to markets and the soft landing.”
Guha added that if the Fed does not implement the 50 basis-point cut next week,
it might do so in November.
Market Data Recap
Indices
S&P 500: +1.1% (4 p.m. New York time)
Nasdaq 100: +2.2%
Dow Jones Industrial Average: +0.3%
Russell 2000 Index: +0.3%
Currencies
Euro: Little changed at $1.1016
British Pound: Fell 0.3% to $1.3043
Japanese Yen: Little changed at 142.40 per dollar
Cryptocurrencies
Bitcoin: Little changed at $57,581.74
Ether: Fell 1.6% to $2,340.87
Commodities
West Texas Intermediate Crude: Up 2.1% to $67.12 per barrel
Spot Gold: Down 0.2% to $2,512.59 per ounce
Big Tech Leads Stock Rebound Despite Inflation Concerns