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Stock Market Today: Stocks Rally despite Hawkish Comments from Powell

Last Updated 4:15 PM EST

Stock indices finished today’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 increased by 0.61%, 0.66%, and 0.5%, respectively. The rally occurred despite rising treasury yields and Jerome Powell’s comments regarding rate hikes.

Powell indicated that the Federal Reserve will not be slowing down rate hikes anytime in the near future, pointing to history as a reason for not wanting to loosen policy too soon. The central bank is committed to bringing inflation down to its 2% target.

In addition, the U.S. 10-Year Treasury yield increased to 3.315%, a jump of almost five basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 3.504%. This brings the spread between them to -18.9 basis points. The negative spread indicates that investors still have fears of a recession.

Compared to yesterday, the market is pricing in a higher chance of a higher Fed Funds rate for the end of the year. In fact, the market’s expectations for a rate in the range of 3.75% to 4% increased to 81.7%, which is up from yesterday’s expectations of 75.9%.

In addition, the market is now also assigning a 13.2% probability to a range of 3.5% to 3.75%. For reference, investors had assigned a 22.5% chance Wednesday.

Stocks and Oil are in the Green

Last Updated 3:30 PM EST

Stocks are in the green heading into the final 30 minutes of today’s trading session. As of 3:30 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.3%, 0.4%, and 0.1%, respectively.

In addition, WTI crude oil is also up by 1.7% despite crude oil inventories coming in higher than expected. This comes after big declines in the past two trading sessions.

Nevertheless, the commodity’s overall downtrend over the past few months has led to lower gas prices across the country. The national average for regular gas was last $3.751 per gallon, down from yesterday’s reading of $3.764. This is significantly lower than the all-time high of $5.016 per gallon on June 14.

The highest prices can be found in California, where prices are substantially higher than the national average, at $5.306 per gallon. On the other hand, Texas is the state with the lowest gas prices, at $3.213 per gallon.

It’s likely that this downward trend will continue going forward as the Federal Reserve looks to raise interest rates to fight inflation. However, higher rates will destroy demand throughout the whole economy. As a result, lower gas prices might have to come at the cost of a recession.

Stocks are in the Red Halfway into Thursday’s Trading Session

Last Updated 12:25PM EST

Stocks are in the red halfway into today’s trading session. As of 12:25 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.5%, 0.5%, and 0.8%, respectively. The communications sector (XLC) is the laggard so far, as it is down 1.2%. Conversely, the healthcare sector (XLV) is the session’s leader, with a gain of 0.8%.

WTI crude oil remains below $85 per barrel as recession fears continue to weigh on trader sentiment. As a result, the price is hovering around the mid-$83 per barrel range.

Meanwhile, bond yields are higher, as the U.S. 10-Year Treasury yield is now hovering around 3.3%. This represents an increase of more than three basis points from the previous close.

Similar movements can be seen with the Two-Year yield, which is now at 3.5%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -20 basis points.

Initial Jobless Claims Come in Better Than Expected

Last Updated 10:00AM EST

Stock indices are in the red 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.3%, 0.2%, and 0.2%, respectively. On Thursday, the Department of Labor released its Initial Jobless Claims report, which came in better than expected.

In the past week, 222,000 people filed for unemployment insurance for the first time. Expectations were for 240,000 individuals.

When using the four-week average, initial jobless claims were 233,500, down from last week’s reading of 240,500. It’s worth noting that this figure has been trending downwards since the middle of August 2022.

In addition, Continuing Jobless Claims, which measures the number of unemployed people who qualify for unemployment insurance, came in at 1.473 million, worse than the forecast of 1.435 million and higher than last week’s reading of 1.437 million.

Continuing Jobless Claims are currently sitting near their lowest levels since 1970. Relatively speaking, this suggests that individuals aren’t struggling to find other jobs after being laid off.

However, this figure has been on an overall uptrend since the beginning of June. It will be interesting to see if this trend continues as interest rates rise while economic growth continues to slow down.

Pre-Market Update

Stock futures dipped early Thursday morning as Wall Street continued to worry about an economic slowdown amid multiple interest rate increases and positive economic updates.

Futures on the Dow Jones Industrial Average (DJIA) inched 0.02% lower, while those on the S&P 500 (SPX) lost 0.03%, as of 4.28 a.m. EST, Thursday. Meanwhile, the Nasdaq 100 (NDX) futures remained 0.01% below parity.

What Happened on Wednesday?

On Wednesday, the stock market rallied in a strong rebound, leading the Nasdaq Composite to break out of a week-long losing streak. The S&P 500, the Dow, and the Nasdaq 100 ended 1.83%, 1.4%, and 2.07% higher, respectively.

Wednesday’s rally might have been a result of the market realizing that the economy is strong enough to handle a tighter market policy. Experts believe that for the past few weeks, investors were struggling to find ground in the stock market. Any positive economic data would mean more motivation for the Fed to continue being hawkish and would send investors running for safer investment instruments.

Moreover, bond yields also eased, with the yield on the 10-year Treasury note declining to 3.264% from 3.339% the day before. As bond yields move inversely with stock prices, a drop in yields took some pressure off stock prices as well.

Moreover, there was a significant decline in oil prices as well, which buoyed investors’ sentiments. International benchmark Brent crude tumbled 5.2% to $88 per barrel.

What Awaits Investors on Thursday

The weekly jobless claims report is due to be out on Thursday morning, which will give us more insight into the unemployment scenario of the U.S. Economists expect the number of initial jobless claims to come in at 240,000 this week, up from the previous week’s print of 232,000.

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