Wall St rallies as data, RBA move raises hopes of Fed easing

  • Twitter jumps on Musk news to resume buying at $54.20/share
  • Rivian wins to reaffirm its vision of deliveries for the year; peers win
  • US job openings post biggest drop in 2.5 years in August
  • Dow closes up 2.80%, S&P 3.06%, Nasdaq 3.34%

Oct 4 (Reuters) – The S&P 500 Index (.SPX) posted its biggest single-day rally in two years on Tuesday after weaker U.S. economic data and a weaker-than-expected Australian interest rate hike raised hopes of a less aggressive tightening by the federal government. Reserve.

While demand for labor remains quite strong, job creation in the United States fell the most in almost 2 and a half years in August, a sign that the Fed’s mission to control inflation in raising rates was helping to slow the economy. Read more

Earlier, the Reserve Bank of Australia surprised markets with a lower than expected interest rate hike of 25 basis points. Its cash rate hit a nine-year high after six rate hikes in as many months in a tightening cycle that other central banks are also engaged in. Read more

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The RBA is the first major central bank to recognize that now is the time to slow down after an aggressive rate hike this year, said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.

“There is hope that the Federal Reserve will say the same thing at some point in the fourth quarter. Don’t stop raising interest rates, just slow the pace,” he said. “That’s what the market is rallying around below the surface.”

Still, Fed Governor Philip Jefferson said inflation was the most serious problem facing the U.S. central bank and one “could take some time” to resolve. San Francisco Fed President Mary Daly said the central bank needs to raise rates further. read more read more

Rate-sensitive tech stocks rose as yields on the benchmark 10-year Treasury fell for the second day in a row after the jobs data and the RBA’s surprise decision. The valuations of technology stocks and other growth stocks fall when their cost of capital rises.

This is the biggest one-day gain for the S&P 500 since May 2020. The Dow Jones Industrial Average (.DJI) and S&P 500 (.SPX) posted their biggest two-day rallies since April 2020.

The impact of higher rates will likely be reflected in corporate earnings when earnings season begins in two weeks, said Dennis Dick, founder and market structure analyst at Triple D Trading Inc.

“We are still in a more difficult period here. I think this results season will not be good,” he said. “If any of the big guns warn, it could end the rally pretty quickly. It’s just a relief really as opposed to the start of a new bull market.”

A trader works on the floor of the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., September 13, 2022. REUTERS/Andrew Kelly

Billionaire Elon Musk has offered to continue his initial $54.20 bid to take Twitter Inc private, two sources familiar with the matter said on Tuesday, sending shares of the social media company up 22.24% . Twitter was the biggest percentage gainer on the S&P 500.

Tesla shares had risen about 6% before the news and immediately pared the gains, ending up 2.90% on the day. Read more

Megacap titans led the rally, with Amazon.com Inc (AMZN.O) climbing 4.50% and Microsoft Corp (MSFT.O) advancing 3.38%. Apple Inc (AAPL.O) rose 2.56% while Google’s parent company Alphabet Inc (GOOGL.O) gained 3.04%.

Banks such as Citigroup, Morgan Stanley and Goldman Sachs climbed more than 3%.

The rally was broad based, with just six stocks in the S&P 500 index closing lower.

The Dow Jones Industrial Average (.DJI) rose 825.43 points, or 2.8%, to 30,316.32, the S&P 500 (.SPX) gained 112.5 points, or 3.06%, to 3,790.93 and the Nasdaq Composite (.IXIC) added 360.97 points, or 3.34%, to 11,176.41.

Volume on U.S. exchanges was 12.51 billion shares, compared to an average of 11.63 billion for a full session over the past 20 trading days.

Monday’s rebound in stocks followed the S&P 500 (.SPX)’s lowest close in nearly two years last week, which capped its worst monthly performance in September since March 2020.

Rivian Automotive Inc (RIVN.O) jumped 13.8% after the electric vehicle maker said it produced 7,363 units in the third quarter, 67% more than the previous quarter, and maintained its annual target of 25,000. Read more

Advancing issues outnumbered declining issues on the NYSE by a ratio of 6.80 to 1; on the Nasdaq, a ratio of 3.70 to 1 favored advancers.

The S&P 500 posted two new 52-week highs and a new low; the Nasdaq Composite recorded 53 new highs and 73 new lows.

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Reporting by Medha Singh, Ankika Biswas and Bansari Mayur Kamdar in Bengaluru; Editing by Anil D’Silva, Arun Koyyur, Sriraj Kalluvila and Richard Chang

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