Wall Street hits four-week highs as bond yields fall

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  • Energy stocks follow the fall in oil
  • The Fed’s Beige Book indicates that price pressures are still lingering
  • Fed Chairman Powell will speak on Thursday
  • Dow up 1.4%, S&P 500 up 1.84%, Nasdaq up 2.14%

Sep 7 (Reuters) – U.S. stock indices climbed the most in about a month as bond yields eased as investors shrugged off hawkish remarks from Federal Reserve officials on Wednesday.

The last time the Nasdaq Composite (.IXIC), S&P 500 (.SPX), and Dow Jones Industrial Average (.DJI) hit a larger one-day percentage jump was on August 10, though investors doubt this is a lasting trend. .

The tech-heavy Nasdaq led the gains among major indexes, ending a seven-game losing streak.

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U.S. stocks have sold off sharply since mid-August after hawkish comments from Fed Chairman Jerome Powell were compounded by signs of an economic slowdown in Europe and China and aggressive moves by major central banks to controlling inflation.

Data signaling the strength of the US economy prompted traders to bet on a 75 basis point interest rate hike by the Fed later this month. Fed funds futures implied that investors were pricing more than a 76% chance of such a move.

The 10-year Treasury yield slipped from three-month highs hit earlier in the session, boosting shares of rate-sensitive stocks such as Tesla Inc (TSLA.O), Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O).

High-growth companies such as those in the tech sector tend to profit from falling yields because it means a lower discount rate on their future earnings when investors calculate valuations.

Still, investors are looking for more outward signs of how the Federal Reserve’s rate hikes will play out to rein in runaway inflation ahead of its next meeting later this month.

“Bond markets are doing a little better today, which gives the stock market a little better, but the big worries are still what the Fed is going to do on September 21. So we’re seeing a back and forth shooting. rope every day,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company.

Stock performance also shrugged off hawkish comments from the Federal Reserve earlier on Wednesday. Cleveland Federal Reserve Chair Loretta Mester said the high cost of rental housing in the United States has not yet fully passed through to inflation measures, suggesting that inflation could rise further. Read more

Meanwhile, Richmond Fed President Thomas Barkin said the U.S. central bank must raise interest rates to a level that restricts economic activity and hold them there until policymakers are told. “convinced” that inflation is falling, while Federal Reserve Vice Chairman Lael Brainard added that monetary policy needs to be restrictive “for a while”.

The focus will be on Powell’s speech on Thursday and US consumer price data next week for clues on the path of monetary policy.

The Fed’s “Beige Book,” a periodic snapshot of the health of the US economy, indicates that price pressures are likely to persist at least through the end of the year.

The Dow Jones Industrial Average (.DJI) rose 435.98 points, or 1.4%, to 31,581.28, the S&P 500 (.SPX) gained 71.68 points, or 1.83%, to 3,979.87 and the Nasdaq Composite (.IXIC) added 246.99 points, or 2.14%, to 11,791.90.

Ten of the 11 major S&P sectors were trading higher, led by a jump in utilities (.SPLRCU), reflecting investors’ defensive positioning amid economic uncertainties.

The energy index (.SPNY) fell 1.16% as oil prices fell around 5% on demand concerns over looming recession risks. Brent crude fell below $90 a barrel. Read more

Nio Inc reversed earlier losses and ended the session up 2.16% after the Chinese electric vehicle maker reported a larger second-quarter adjusted net loss, but revenue beat expectations.

Coupa Software Inc (COUP.O) jumped nearly 18% after the payment management software company beat second-quarter revenue and profit estimates.

Volume on U.S. exchanges was 10.21 billion shares, compared to an average of 10.43 billion for the full session over the past 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a ratio of 3.07 to 1; on the Nasdaq, a ratio of 2.60 to 1 favored advancers.

The S&P 500 posted 6 new 52-week highs and 16 new lows; the Nasdaq Composite recorded 24 new highs and 231 new lows.

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Reporting by Carolina Mandl, in New York, with additional reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Editing by Anil D’Silva, Maju Samuel, Shounak Dasgupta and Aurora Ellis

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