October 5, 2022
Dow rises as Wall Street snaps 3-week skid

Wall Street’s main indexes rose on Friday, boosted by technology and high-growth stocks, as investors awaited key inflation data next week to gauge the pace of interest rate hikes by the Federal Reserve.

In afternoon trading, the Dow Jones Industrial Average was up over 300 points, or 1%, at 32,102, the S&P 500 up 1.2% and the Nasdaq 1.8%.

Still, the S&P 500 and the Nasdaq are down about 6% and 8.3%, respectively, from their peaks in mid-August, as the Fed and other major central banks reaffirmed their commitment to bring down decades of high inflation.

US stocks have stabilized this week after a sharp selloff that began in mid-August due to the impact of tighter monetary policy and slowdowns in Europe and China.

Despite sharp comments from Fed policymakers, the index is on track to break its three-week losing streak, which fueled hopes of another external rate hike at the central bank’s September 20-21 meeting.

nyse trader
Stocks have stabilized this week after a sharp selloff that began in mid-August due to the impact of tighter monetary policy and slowdowns in Europe and China.
Reuters

“We oversold in the last few weeks in August and this is a relief rally,” said Dennis Dick, Head of Market Structures, Triple D Trading.

“The market is, to some extent, overtaken by next week’s CPI (Consumer Price Index) data. It is quite predictable that the data is going to be lighter next week. We have had significant commodity deflation during the last four weeks.”

For the August inflation report due next Tuesday, investors will see that the price pressure may ease. It is expected to show that prices rose 8.1% in August, compared to 8.5% in July.

Traders are pricing in an 86 per cent chance of a 75-basis-point rate hike in the next meeting, up from 57% a week ago, according to CME Group’s FedWatch tool.

Fed Chairman Jerome Powell said on Thursday that the US central bank is “strongly committed” to controlling inflation, but hoped it can be done without the “too much social cost” involved in the pre-inflation battle.

Several Fed policymakers, including Fed Kansas City Chairman Esther George, a voting member of the rate-setting committee this year, are due to speak later in the day.

All 11 major S&P sectors had higher turnover, along with communications services, technology and consumer discretion.

High-growth stocks such as Tesla, Apple, Alphabet and Amazon gained more than 1%.

The CBOE Volatility Index, a gauge of investor anxiety, fell to a two-week low of 22.9, but remained above its long-term average of 20.

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