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Sunday July 14, 2024

Wall St follows world stocks higher powered by AI, rate cut hopes

By News Desk
June 21, 2024
A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. December 28, 2016. — Reuters
A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. December 28, 2016. — Reuters

NEW YORK: US stocks followed their European counterparts higher on Thursday and Treasury yields rose as soft economic data and central bank actions abroad set the stage for a dovish pivot from the Federal Reserve.

The artificial intelligence rally continued to lead the charge, with chipmaker Nvidia -- which recently claimed the mantle as the world’s most valuable company by market cap -- rising 2.5 per cent.

All three major US stock indexes were green and the dollar inched higher in early trade.Weaker-than-expected economic reports, including disappointing housing starts and building permits data, along with a jobless claims report suggested a gradual cooling in the labor market, appeared to make the case that the Fed's restrictive policy is having its intended effect.

“The weaker-than-expected economic data is suggesting that the higher-for-longer interest rates are achieving the Fed’s objectives,” Greg Bassuk, chief executive officer at AXS Investments in New York, said. “These signs of a slightly slowing economy are going to be welcomed by the Fed as they consider a move toward interest rate cuts.”

This, combined with dovish sentiment expressed by the Bank of England and the Swiss National Bank’s interest rate cut, seemed to give the Fed some maneuvering room over the timing of its first interest rate cut.

“The move toward dovish sentiment by foreign central banks confirms not only that global interest rates have peaked, but importantly for investors, that rate cuts, including in the US, are on the near-term horizon,” Bassuk added.

Minneapolis Federal Reserve President Neel Kashkari said while the US economy has proven resilient, he sees some softening around the edges.Even so, expectations for a rate cut as soon as September have faded a bit. Financial markets are currently pricing in a 57.9 per cent chance of a 25-basis-point rate cut in September, down from 61.1 per cent a week ago, according to CME’s FedWatch tool.

The Dow Jones Industrial Average .DJI rose 84.8 points, or 0.22 per cent, to 38,919.66, the S&P 500 .SPX gained 21.86 points, or 0.40 per cent, to 5,495.09 and the Nasdaq Composite .IXIC added 13.88 points, or 0.08 per cent, to 17,876.12.

European shares were given a boost by tech and real estate, and by a rally in Swiss equities after the central bank continued to loosen monetary policy.The pan-European STOXX 600 index .STOXX rose 0.71 per cent and MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.14 per cent.

Emerging market stocks lost 0.04 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.13 per cent lower, while Japan’s Nikkei .N225 rose 0.16 per cent.

US Treasury yields initially backed away from their highs following the economic data, before resuming their climb.Benchmark 10-year notes US10YT=RR last fell 18/32 in price to yield 4.2847 per cent, from 4.217 per cent late on Tuesday.

The 30-year bond US30YT=RR last fell 37/32 in price to yield 4.4221 per cent, from 4.354 per cent late on Tuesday.The greenback inched higher against a basket of world currencies amid a busy day among world central banks.

The dollar index .DXY rose 0.18 per cent, with the euro EUR= down 0.13 per cent to $1.0728.The Japanese yen weakened 0.40 per cent versus the greenback at 158.74 per dollar, while Sterling GBP= was last trading at $1.2686, down 0.24 per cent on the day.

Crude oil prices gained ahead of the Energy Information Administration’s (EIA) release of inventory data, as escalating tensions in the Middle East exacerbated supply concerns.US crude CLcv1 rose 0.62 per cent to $81.21 per barrel and Brent LCOcv1 was last at $85.79, up 0.85 per cent on the day.Gold prices jumped to a two-week peak as rising rate cut bets gave a boost to demand.