Fed commentary triggers surge in megacap tech stocks

All three major indices rallied as the Fed kept rates unchanged but pointed to a likely easing in September as the inflation outlook continues to improve.

The broad S&P 500 rallied 1.58 per cent, while the Nasdaq surged 2.64 per cent for the best session since February. The Dow Jones closed 0.24 per cent higher.

Turning to US sectors, Technology was the best performing sector, surging 3.95 per cent on the day. The worst performer was Healthcare, which finished down 0.39 per cent.

The key driver on the day was the Fed rates decision and commentary. Rates were held steady as expected. Fed Chair Jerome Powell further commented that if data continues to give the central bank confidence that inflation is slowing, a rate cut in September is likely. The Federal Open Market Committee struck a slightly more optimistic tone in its post-meeting statement, saying that in recent months, further progress has been made toward bringing inflation down closer to the central bank’s 2 per cent target.

Jobs data released earlier in the day also pointed to a slowing economy and adding further support to an easing cycle. Private job growth slowed further in July as the pace of wage gains dropped to a three-year low, according to the latest ADP report.

In company news, Mega cap tech names surged higher led by Nvidia which popped 12.8 per cent for its best day since Feb as better-than-expected results from rival Advanced Micro Devices triggered optimism in the semiconductor space. Other tech stocks such Apple, Meta Platforms and Amazon were also higher. Microsoft, however, pulled back 1 per cent on disappointing quarterly cloud revenue.

Boeing closed 2 per cent higher after it announced the appointment of a new CEO. The aerospace giant also reported a bigger than expected loss and disappointing revenue for the second quarter. Humana fell 10.6 per cent after providing weaker than expected earnings guidance.

In commodities news, money managers have closed out more than $20B in bullish copper bets since mid-May amid mounting worries around Chinese demand. Copper prices have slumped by more than 20 per cent after reaching record highs in May this year. Investment bank UBS stated that a looming crunch in supply is likely to give the remaining investors' confidence to stick with their bets. There are growing expectations that smelters will be forced to cut output soon following a collapse in processing fees.

Oil rose following the assassination of Hamas’ political chief in Tehran after Iran’s supreme leader vowed revenge on Israel. Brent crude was 2.8 per cent higher to $US80.72 a barrel late in New York.

Futures

The SPI futures are pointing to a 0.2 per cent gain.

Currency

One Australian dollar at 7.25am was buying 65.43 US cents.

Commodities

Gold has added 0.86 per cent. Silver has gained 1.45 per cent. Copper has advanced 2.26 per cent. Oil has jumped 4.26 per cent.

Figures around the globe

European markets closed higher. London’s FTSE added 1.13 per cent, Frankfurt gained 0.53 per cent, and Paris closed 0.76 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei added 1.49 per cent, Hong Kong’s Hang Seng gained 2.01 per cent, while China’s Shanghai Composite closed 2.06 per cent higher.

Yesterday, the Australian share market closed 1.75 per cent higher at 8092.33.

Ex-dividends

Perpetual Cred Trust (ASX:PCI) is paying 0.6783 cents unfranked
Pengna Global Private (ASX:PCX) is paying 1.16 cents unfranked
PRL Global Ltd (ASX:PRG) is paying 5 cents fully franked

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap, Marketech.

Disclaimer

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