US indexes rally as investors hope the Fed is done raising rates

The Dow Jones Industrial Average on Thursday rallied more than 400 points and the S&P 500 touched a fresh 13-month high, as investors bet the Federal Reserve was close to done raising rates after the central bank this week skipped a hike.

Fed Chair Powell's post-meeting press conference revealed that the Federal Open Market Committee will assess the cumulative tightening of monetary policy before the next meeting, leading investors to speculate on the uncertain July policy move. Powell highlighted the possibility of more rate hikes this year and emphasised the Fed's data-driven approach, resulting in stock market fluctuations.

The 30-stock Dow added 428.73 points, or 1.26 per cent, to close at 34,408.06. The S&P 500 climbed 1.22 per cent to finish the session at 4,425.84, while the Nasdaq Composite gained 1.15 per cent to close at 13,782.82. Bond yields were lower, while tech stocks continued to lead the market upswing — in line with the trend on Wall Street in 2023.

Thursday’s gains brought the S&P 500 and Nasdaq to their highest intraday levels since April 2022

The S&P 500 is also riding its longest winning streak since November 2021 and is headed for its strongest weekly gain since March. From its October closing low, the broader market index is up 23 per cent. It’s also risen 15 per cent year to date. As for the Nasdaq, the tech-heavy benchmark is up more than 31 per cent in 2023.

In tech, shares of Microsoft and Oracle were higher with gains of about 3.2 per cent and 3.5 per cent. Alibaba stock climbed close to 3.2 per cent.

New economic data provided investors and policymakers with improved understanding of the labour market and consumer spending, as weekly jobless claims exceeded expectations at 262,000 (compared to an estimated 245,000 by Dow Jones), and retail sales showed a modest increase of 0.3 per cent.

Goldman Sachs' equity team led by David Kostin has noted a significant improvement in the outlook for initial public offerings, with their IPO Issuance Barometer reaching its highest level since March 2022, driven by stabilising equity prices and favourable macroeconomic factors such as slowing inflation, healthy economic growth, and high market concentration, which could potentially lift the equity market higher.

The European Central Bank (ECB) raised interest rates by another quarter-point, indicating a high likelihood of a further hike in July, as stated by ECB President Christine Lagarde, while also emphasising the persistence of high inflation in the eurozone. Although Lagarde did not provide insight into rate expectations beyond next month, markets are increasingly anticipating another rate increase in September, leading to expectations of a heated summer debate among officials regarding signalling future moves.

In commodity news, European gas prices have experienced a rapid doubling in just 10 trading days, indicating ongoing concerns about gas supply despite record-high storage levels. The European gas benchmark, Title Transfer Facility (TTF), reached its highest level since early April, rising as much as 27 per cent to €49.50 per megawatt hour in Thursday's trading, after hitting a two-year low of €23/MwH at the beginning of June.

Futures

The SPI futures are pointing to a 0.4 per cent gain.

Currency

One Australian dollar at 7:20 AM was buying 68.84 US cents.

Commodities

Iron ore futures are pointing to a 1.2 per cent fall.

Gold added 0.09 per cent. Silver fell 0.66 per cent. Copper gained 0.71 and oil jumped 3.44 per cent.

Figures around the globe

Across the Atlantic, European markets closed mixed. London’s FTSE added 0.34 per cent, Frankfurt lost 0.13 per cent while Paris closed 0.51 per cent lower.

In Asian markets, Tokyo’s Nikkei lost 0.05 per cent, Hong Kong’s Hang Seng gained 2.17 per cent while China’s Shanghai Composite closed 0.74 per cent higher.

Yesterday, the Australian sharemarket closed 0.19 per cent higher at 7175.

Ex-dividends

AFT Pharmaceuticals (ASX:AFP) is paying 0.6854 cents unfranked

Dividends payable

Technology One (ASX:TNE)

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

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