Topline
The stock market surged higher on Friday, with stocks on pace to snap a three-week losing streak as investors shook off Federal Reserve Chair Jerome Powell’s recent comments about more interest rate hikes from the central bank for the foreseeable future.
Key Facts
The Dow Jones Industrial Average was up 1.2%, nearly 400 points, while the S&P 500 gained 1.5% and the tech-heavy Nasdaq Composite 2.1%.
Stocks are looking to reverse three straight weeks of losses with more gains on Friday, as the Dow has risen 1.4% through Thursday’s close, while the S&P 500 has gained over 2%.
Markets have swung back and forth in recent days amid growing expectations that the Federal Reserve will hike interest rates by 75 basis points at its upcoming policy meeting later this month, following similar hikes in June and July.
Powell said in a Q&A session with the Cato Institute on Thursday that the central bank remains “strongly committed” to bringing down inflation and will keep aggressively raising rates “until the job is done.”
Shares of electronic signature company DocuSign, meanwhile, surged over 10% after reporting stronger than expected quarterly earnings, while cloud security company Zscaler similarly jumped nearly 22% after strong financial results.
Oil prices rebounded slightly on Friday after dipping earlier this week on fears that a global economic downturn could hurt energy demand: U.S. benchmark West Texas Intermediate rose 3% to trade at $86 per barrel, while international benchmark Brent crude now trades at nearly $92 per barrel.
Crucial Quote:
Stocks will continue to “take their cues from the Fed and domestic inflation, and both those are moving in the right direction,” says Vital Knowledge founder Adam Crisafulli. “It’s crucial not to get caught up in the day-to-day noise when it comes to the Fed,” he describes, adding that while a Fed pivot looks unlikely to arrive anytime soon, the central bank could slow the pace of its rate-hiking campaign later this year.
What To Watch For:
Guggenheim Partners’ global chief of investment strategy, Scott Minard, predicts a big market selloff is still around the corner. “This is seasonally the worst time of the year,” he told CNBC on Thursday, adding that the bear market is still “intact,” though investors have been “ignoring” the challenging macroeconomic environment. Minard predicts the S&P 500 will decline 20% from current levels by mid-October.
Further Reading:
Stocks Rally Even After Powell Reiterates That Fed Will Keep Raising Rates (Forbes)
Oil Prices Hit Seven-Month Low As Recession Fears Weigh On Demand (Forbes)
Dow Falls Nearly 200 Points As ‘Gloomy’ Investors Brace For Higher Interest Rates (Forbes)
The Stock Market’s Summer Rally Is Over And Investors Should Prepare For A Rough September (Forbes)