All three benchmark indexes on Wall Street rose on Thursday as new retail data fueled the market’s expectations that the U.S. Federal Reserve would soon end its monetary tightening campaign.
The S&P 500 and Nasdaq Composite hit their highest closes in over a year. The S&P 500 closed at 4,425.84, rising by 1.22 percent or 53.25 points, while the tech-leaning Nasdaq concluded the trading session at 13,782.82, adding 1.15 percent or 156.34 points. Meanwhile, the Dow Jones gained 1.26 percent or 428.73 points to finish at 34,408.06.
The U.S. Commerce Department reported that retail sales increased by 0.3 percent in May, against the earlier estimates of a 0.1 percent decline. Analysts said the retail data reflected resilient consumer spending despite the Fed’s hawkish monetary policy and uncertain macroeconomic environment.
Another report also showed that import prices declined by 1.9 percent last month, indicating easing inflation. Unemployment claims stayed around 262,0000 from June 4 to 10, but higher than economists’ prediction of 249,000 claims.
“Due to softer inflation data earlier this week and resilient economic data after the Fed meeting, the market is rallying and yields are falling because investors don’t believe the Fed is as hawkish as they presented,” said Baird investment strategy analyst Ross Mayfield.
According to Mayfield, the market no longer expects the U.S. central bank to do two more rate hikes. Fed fund futures forecast a 67 percent chance that the central bank will increase its benchmark rate by 25 basis points next month. Investors also predict a potential rate cut by December.
“The market doesn’t believe they have two more hikes in the chamber.”
Ross Mayfield, Baird investment strategy analyst
Experts say the Fed’s recent policy decision signals a “wider path” for its future actions. Fed chairman Jerome Powell said Wednesday that the central bank’s main goal was to get “the policy right” and not “surprise the markets.”
All 11 major S&P 500 sectors gained on Thursday. Healthcare was the best-performing sector in the index, gaining 1.55 percent to close at 1,536.36. Communication services posted a 1.54 percent increase and finished at 219.12.
Rate-sensitive growth stocks supported Wall Street’s rally, as noted by analysts. Apple’s stock jumped by 1.12 percent at the closing bell, trading at $186.01. Microsoft recorded a 3.19 percent increase to $348.10. TradeStation vice president of Market Intelligence David Russell said investors were less “scared” of a potential recession, prompting them to return to the equity market.
The S&P 500 index has gained around 15 percent so far this year, while the Nasdaq has increased by 32 percent. Both indexes posted their worst annual losses in years in 2022 amid heightened fears of a recession and the Fed’s consecutive rate hikes.
Crypto dips
Analysts have pointed out that major cryptocurrencies dipped following the Fed’s policy decision despite rising risk appetite in other markets. Bitcoin, the largest digital currency by market capitalization, slipped by four percent to trade below $25,000 on Thursday. It was the first time for said currency to trade below the psychological support rate in three months.
Ether and BNB also posted more than five percent declines, while stablecoin Tether traded below its critical $1 rate. Analytics firm CoinMarketCap said Thursday’s drops dragged the crypto’s total market value to its lowest level since the banking crisis in March.
Analysts said pressures from U.S. regulators had weighed on the crypto sector in the past month. The Securities and Exchange Commission filed new lawsuits against crypto exchanges Binance and Coinbase last week, indicating further volatility in the crypto market. On Thursday, crypto lenders Delio and Haru also suspended withdrawals.