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Wall St closes sharply higher on hopes of abating Fed

Published 10/24/2022, 05:23 AM
Updated 10/24/2022, 07:20 PM
© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 17, 2022. REUTERS/Brendan McDermid

By Stephen Culp

NEW YORK (Reuters) - U.S. stocks advanced on Monday, extending last week's gains as signs of economic softness suggested the effects of the Fed's aggressive policy aimed at cooling the economy, thereby curbing decades-high inflation, are beginning to take root.

All three major U.S. stock indexes gained momentum throughout the first session of a week jam-packed with high profile corporate earnings and crucial economic data.

A report from S&P Global (NYSE:SPGI) showed a contraction in business activity this month, offering a hint that the Federal Reserve's barrage of steep interest rate hikes are having their desired effect, raising hopes that the central bank could begin slowing the pace of increases to the Fed funds target rate.

"It’s a sign the economy is slowing down and what the Fed is doing is working," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "They may be achieving their goal and we might be approaching the fourth quarter of rate hikes, to use an football analogy."

The Dow Jones Industrial Average rose 417.06 points, or 1.34%, to 31,499.62, the S&P 500 gained 44.59 points, or 1.19%, to 3,797.34 and the Nasdaq Composite added 92.90 points, or 0.86%, to 10,952.61.

Among the 11 major sectors in the S&P 500, nine closed green, with healthcare enjoying the largest percentage gain. Materials and real estate ended the session in negative territory.

Tesla (NASDAQ:TSLA) Inc shares slid 1.5% after the electric automaker cut prices for its Model 3 and Model Y cars by as much as 9% in China, signaling softening demand in the world's largest auto market.

U.S.-listed shares of Chinese companies such as Pinduoduo (NASDAQ:PDD), JD (NASDAQ:JD).com and Baidu Inc (NASDAQ:BIDU) plunged between 12% and 25% as President Xi Jinping introduced the new Politburo Standing Committee stacked with loyalists.

"The news coming out of China makes you think there’s going to be a firmer if not antagonistic China in our future," Tuz added. "But it’s too early to see how it’s going to play out as far as where you invest in the future."

Third quarter earnings season shifts into overdrive this week. So far, nearly one-fifth of the companies in the S&P 500 have reported. Of those, 74.7% have delivered consensus-beating results, according to Refinitiv data.

Analysts expect S&P 500 earnings growth of 3.0%, on aggregate, down from 4.5% at the beginning of the month, per Refinitiv.

Results from a slew of heavy-hitting tech and tech-adjacent companies are likely to dominate the earnings chatter this week.

Microsoft Corp (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) Inc following on Tuesday. On Wednesday, Apple Inc (NASDAQ:AAPL) and Meta Platforms Inc step up to the plate, with Amazon.com (NASDAQ:AMZN) wrapping up the FAANGs on Thursday.

High-rolling industrials are also expected to post earnings this week, including United Parcel Service (NYSE:UPS), Boeing (NYSE:BA) Co, Ford Motor (NYSE:F) Co, 3M Co, General Motors Co (NYSE:GM), Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM).

Advancing issues outnumbered declining ones on the NYSE by a 1.36-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored advancers.

© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 17, 2022. REUTERS/Brendan McDermid

The S&P 500 posted 21 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 73 new highs and 331 new lows.

Volume on U.S. exchanges was 11.80 billion shares, compared with the 11.56 billion average for the full session over the last 20 trading days.

Latest comments

it was not sharply higher. it was measly tick higher. it was jumping up and down like a chicken with its head cutoff
I thought JP said that the Fed's mission was to lower inflation even if it causes economic growth to slow. So why are investors expecting the Fed to slow the pace of rate increases if economic growth slows? Investors should only expect the Fed to slow the pace of rate increases if inflation decreases.
The Fed is willing to raise rate to stabilize/lower inflation even if it causes economic growth to slow  or even go negative A BIT.  There is a limit.
Good point, Casador.
Its just fake news until resistance and first is abaut 3800 aka. now. If rejected then news are abaut bullish Fed etc.. Just bots nowdays.
its impossible to have a healthy bull market with 10% inflation. the whole market will still correct another 25%.. this is a bull trap and im not buying..
Check out inflation & stock market around 1980.
not just inflation, 60% of americans live paycheck to paycheck. murica is going to implode
  It was 78% in Aug 2017, according to CareerBuilder:  "78 percent of U.S. workers live paycheck to paycheck to make ends meet".
News wire bulletin: Nuclear war has begun. Chinese Markets collapse. U.K needs 500 billion dollar bailout. People choosing between food and heat.FED says they will cut rates early next year. MARKET up 2000 points on bullish FED
todos ponerse a comprar
Hilarious, we can see that Wall St doesn't give a hoot about the US economy and Main St., but they certainly care about their free lunches provided by the FED
wall street rises as wall street rises. If Fed raises rates they will kill the economy. If Fed doesn't raise rates they will kill the economy.
Shrinking business activity with continuing high inflation. Hiking interest rates can only be effective against inflation if fiscal spending is greatly reduced. This will never happen with the current regime.
Now is the only thing that's real.
Now, Russia is really aggressing Ukraine and weaponizing energy/food exports, causing the current high inflation.
You have no clue wtf youre talking about.
funny. Interest rates stay above 4% over the year. Slow interest rates increase or fast. stock market pump and dumb
actually, less fed rate hike is just reason to pump markets for the sake of huge expiring options. now again this reason to pump a little to unwind longs
carlos:  I do note your projections.  And that you just blocked.
new bull market already started silently , the feds would pivot surprised
Sir Graham Brady, chair of the 1922 Committee, announced on that Rishi Sunak is elected as leader of the Conservative Party and new prime minister following Penny Mordaunt's decision to drop out of the contest.
BIG DROP COMING
Pure, unadulterated fraud.
I feel like laughing looking at how the market works. how come the VIX stands at 2.5% with markets near to bullish flat
no VIX has an inverse proportion with the market trends. with S&P500VIX high index should be negative and vice versa
now it is corrected tho earlier it was not
Look up the formula for calculating VIX.  It includes call premiums.  Tech ERs (e.g., GOOGL, TXN & SAP tmrrw) are coming up.  Option market is pricing in possibilities for both bad and good reports.
How are bond yields retreating. US markets are buying into the predication that low confidence and high bearishness signals a bottom. That, and little news recently, is enough until it isn't.
And the hope that the Fed will weaken its position on softer data. Basically, good or bad news is good news unless it is catastrophic news.
Short always good
don't short market gonna make min 2000 point move in 1-2 days mark it shorters trapped badly have to cover or they go curreupt. enjoy the show
lol, investing.com back in business
Retreat … going back up again
How high is 0.1 percent?
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