US shares post solid gains on positive economic data

NEW YORK: Wall Street equities finished with solid gains on Thursday (Aug 25), boosted by upbeat economic data and despite more Federal Reserve (Fed) officials repeating the message that interest rates will continue to rise to combat inflation

Shares opened higher and remained in the green throughout the trading session, as the Dow Jones Industrial Average gained 1.0% to finish the day at 33,291.78.

The broad-based S&P 500 jumped 1.4% to close at 4,199.52, while the tech-rich Nasdaq Composite Index increased 1.7% to 12,639.27.

Fed chair Jerome Powell's speech today (Aug 26) to the annual central banking symposium in Jackson Hole, Wyoming, has been the focus of attention all week.

Nick Reece of Merk Investments said markets seem to have come around to the idea that Powell will stick to his guns on the inflation message.

“Powell probably isn’t going to say anything unexpected,” he told AFP, which means “the market can have a relief rally.”

He also noted the positive economic data as a factor in the day’s gains.

Government reports showed initial applications for unemployment benefits unexpectedly fell last week, dispelling concerns about a weakening job market, while gross domestic product in the second quarter contracted by 0.6%, much less than first reported.

Before Powell’s speech, markets today will get a look at the Fed’s preferred inflation index, which like Consumer Price Index is expected to show a dramatic slowdown in July due to falling petrol prices.

But economists say Powell will reiterate that the Fed will keep raising interest rates until prices are trending decidedly lower.

“We’re in a period of time between the end of the second-quarter earnings season and meaningful additional data from the Federal Reserve. Markets are churning a bit with a reasonably low level of volatility,“” said Bill Northey, senior investment director at US Bank Wealth Management in Minneapolis.

The yield on the closely watched 10-year Treasury note faded after recently hitting a two-month high. Declining interest rates tend to benefit technology stocks trading at high valuations.

“Lower interest rates have certainly put some support underneath some of the more growth-oriented sectors,” Northey said.

Nvidia jumped 4% after the graphics chipmaker gave a weaker-than-expected quarterly forecast that many investors viewed as signalling the worst of a sales downturn may be over. That drove a rally in the Philadelphia semiconductor index .

Apple and Microsoft rose more than 1%, while Amazon and Google-owner Alphabet added more than 2%, with all four companies making substantial contributions to the Nasdaq's increase. – AFP, Reuters

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