The major US benchmark indices rebounded on Wednesday following a volatile trading day, with tech stocks and cryptocurrencies leading the charge. These indices were set to recover following a sell-off in the previous session due to volatile inflation data that cast doubt on the timing of the Federal Reserve's first interest-rate decrease of the year.
Premarket trade saw gains of 0.7% to 1.5% in the rate-sensitive mega caps Alphabet, Microsoft, Meta Platforms, Advanced Micro Devices, and Nvidia, while US Treasury note rates retreated marginally from over two-month highs. Nvidia outpaced Alphabet to become the third-largest US company by market capitalization.
Wall St Set to Rise After Sell-off
The blue-chip Dow suffered its worst day in 11 months on Tuesday, and the indices had fallen to levels more than one week ago. This was due to core consumer prices in January remaining above the Fed's 2% objective, which caused investors to reevaluate their expectations for rate cuts.
What's most disconcerting, is the pick up in inflation almost across the board, and certainly in the service side, obviously the hottest part of the economy
Paul Nolte, Senior Financial Adviser and Market Strategist at Murphy & Sylvest
Inflation concerns took a backseat as investors focused on strong corporate earnings and optimistic economic forecasts. The tech sector contributed significantly to the gains that made the S&P 500 rise by 0.50%, whereas the Dow rose by 0.32% and the Nasdaq rose by 0.61%. Despite the bounce back, markets remained cautious as they awaited updates from key central bankers and economic data.
"The market is taking a breather after Tuesday's sell-off due to inflation fears."
Gregori Volokhov, Market Analyst at Mizuho Securities USA
Tech Sector Surges: Microsoft, Apple, Alphabet
Premarket trade saw gains of 0.7% to 1.5% in the rate-sensitive mega caps Alphabet, Microsoft, Meta Platforms, Advanced Micro Devices, and Nvidia, two chip makers, while US Treasury note rates retreated marginally from over two-month highs.
"Tech stocks have been resilient in the face of inflation fears," said Paul Nolte, Senior Wealth Advisor at Murphy & Sylvest. The sector has shown signs of strength throughout the year and is expected to continue its upward trend.
Crypto Stocks Rally: Bitcoin Surpasses $1 Trillion Cap
Cryptocurrency-related stocks rallied, with companies like Coinbase, Marathon Digital, and Riot Platforms up between 9% and 13%. The price of Bitcoin surged above $50,000, pushing its market capitalization past the trillion-dollar mark for the first time since November 2021.
The sentiment towards crypto has shifted positively among investors, as indicated by Dennis Dick of Triple D Trading. The sector had been underperforming due to regulatory concerns and wider market sell-off but has since rebounded strongly.
If AI is truly going to be a game changer for the world, Nvidia is at the forefront of all of that
Dennis Dick, CFA at Triple D Trading
Paving the Way for a Bull Market
Paul Nolte stated that he is not ready to say that inflation is returning back to the 4%-5% level. He also added that he is not ready to say it's just a bump in the road heading down back down to 2%. This year's S&P 500 bull market was made possible by the euphoria around an early start to monetary policy easing, which had propelled a Wall Street surge since November.
In spite of the robust US economy, authorities may need to wait a little while more for additional proof that pricing pressures are abating. The CME FedWatch tool indicated that bets on a rate decrease of at least 25 basis points in May were 33.1%, down from 63% earlier in the week and that bets on a rate reduction in June were 78.6%.
Following Tuesday's statistics, investors will be eager to hear central bankers' perspectives on the direction of policy. Equities futures for the Dow were up 124 points, or 0.32%; those for the S&P 500 were up 24.75 points, or 0.5%; and those for the Nasdaq 100 were up 108 points, or 0.61%, at 8:39 a.m. ET. Small-cap futures tracking rose 1.3% as well.