In morning trading, the S&P 500 surged by 0.5%, poised to set a record for the fourth consecutive day. The Dow Jones Industrial Average climbed 0.2%, adding 63 points, while the Nasdaq composite recorded a 0.7% increase.
This positive momentum in global markets followed the announcement of measures by Chinese authorities to bolster the world’s second-largest economy’s recovery. Hong Kong’s Hang Seng index surged 3.6%, reducing its month-to-date loss to under 7%.
On Wall Street, Netflix saw a remarkable jump of 14.2% after reporting a higher-than-expected increase in subscribers during the last quarter of 2023. Investors prioritized this subscriber growth over the company’s profit, which fell short of analysts’ predictions.
Contributing to the upward trend in tech stocks was ASML, a Dutch company and a major supplier to the semiconductor industry. ASML reported stronger profit and revenue than anticipated, leading to a 7.4% increase in its U.S.-listed stock.
Recent record-breaking performances in the stock market have been fueled by optimism that decreasing inflation will prompt the Federal Reserve to implement multiple interest rate cuts this year. Expectations of rate cuts have already caused a significant decline in Treasury yields, alleviating pressure on the economy and financial system.
The key question on Wall Street is when the Fed will commence rate cuts and the extent to which they will be implemented. Traders have adjusted their bets recently, taking into account stronger-than-expected economic reports that alleviate recession concerns but may contribute to upward pressure on inflation.
A preliminary report on Wednesday indicated that business output growth reached a seven-month high. Crucially for Fed officials, the report from S&P Global also revealed that business prices rose at the slowest rate since May 2020.
Despite some negative signals, such as supply delays due to adverse weather conditions, the report provides a positive message of resilient economic growth and diminishing inflation, according to Chris Williamson, chief business economist at S&P Global Market Intelligence.
Following the report, Treasury yields in the bond market recovered from earlier losses. The 10-year Treasury yield slipped to 4.12% from 4.14%, while the two-year Treasury yield, influenced by Fed expectations, fell to 4.33% from 4.38%.
Upcoming economic reports later in the week could further influence expectations for rate cuts this year. Traders, while not expecting the Fed to cut rates at its upcoming meeting, are placing over a 50% probability that it will happen in March, according to CME Group data.
Earnings reports from companies are also contributing to market movements. Elevance Health saw a 2.9% climb after reporting earnings that slightly exceeded analysts’ expectations. In contrast, Kimberly-Clark fell 4.7% due to weaker-than-expected profit and revenue, and DuPont tumbled 14.1% following forecasts that fell short of analysts’ estimates, citing challenges like weak demand from China.
Concerns about China’s economy have impacted its stock market negatively, making it one of the world’s worst performers. Despite a 1.8% climb in Shanghai stocks following measures to free up cash held by banks, they remain down 5.2% for the year so far. Stocks in Europe rose overall, while Tokyo experienced a dip.
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