Following a severe selloff the previous session due to concerns about significant interest rate hikes by the Federal Reserve to rein in rising prices, U.S. stock indices increased on Wednesday as buyers swooped up undervalued energy and technology firms.
Five of the 11 major S&P sectors were up, topped by the energy sector’s 3.2 per cent gain as oil prices rose almost 2 per cent on supply worries. [O/R]
Following Tuesday’s market-leading falls, shares of technology and growth companies, including Apple Inc. (NASDAQ:AAPL), Tesla Inc. (NASDAQ:TSLA), and Amazon.com (NASDAQ:AMZN) increased by 0.9 per cent to 1.3 per cent.
The three major indices experienced their most percentage drops in a single day on Tuesday since June 2020 as the consumer price report solidified predictions that the U.S. central bank will proceed with its third consecutive 75-basis-point rate hike next week.
The producer prices decreased for a second consecutive month in August as gasoline prices dropped even more, according to Wednesday’s inflation statistics. However, this was not enough to convince investors to change their minds about the Fed’s interventionist policy.
Rates are expected to peak at 4.34 per cent by March 2023, with markets pricing in a 37 per cent likelihood that the Fed will make a hefty 100 bps rise.
“If not probable, it is believable. In addition, I think and hope that the Fed will exercise caution in deciding how aggressively to act given that the economy is slowing, “said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott.
“From here, it will depend on whether we can have a ricochet bounce or if the sellers are merely covering at the moment. Saying that the closing we had following yesterday’s carnage in the equities markets was necessarily the bottom would be premature.”