U.S. Stocks Rally As Latest Data Adds To Interest Rate Optimism

U.S. Stocks Rally As Latest Data Adds To Interest Rate Optimism

November 9, 2023

Extending the strong upward move seen over the past several sessions, stocks moved sharply higher during trading on Thursday. The major averages all showed significant moves to the upside, climbing further off last week’s multi-month lows.

The major averages saw continued strength going into the close, ending the session near their best levels of the day. The Dow jumped 564.50 points or 1.7 percent to 33,839.08, the Nasdaq surged 232.72 points or 1.8 percent to 13,294.19 and the S&P 500 spiked 79.92 points or 1.9 percent to 4,317.78.

The extended rally on Wall Street came amid optimism about the outlook for interest rates following the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed left interest rates unchanged for the third time in the past four meetings, leading to optimism that the central bank is done raising interest rates.

Treasury yields moved notably lower on Wednesday and showed another significant move to the downside today, adding to the buying interest.

The latest economic data added to the optimism about rates, with the Labor Department releasing a report showing an unexpected uptick in first-time claims for U.S. unemployment benefits in the week ended October 28th.

The report said initial jobless claims crept up to 217,000, an increase of 5,000 from the previous week’s revised level of 212,000.

Economists had expected jobless claims to come in unchanged compared to the 210,000 originally reported for the previous week.

A separate report from the Labor Department also showed an unexpected decrease in unit labor costs in the third quarter.

The Labor Department said unit labor costs fell by 0.8 percent in the third quarter after shooting up by a revised 3.2 percent in the second quarter.

Unit labor costs were expected to climb by 0.7 percent compared to the 2.2 percent increase that had been reported for the previous quarter.

“Stocks are rallying as Treasury yields plunge after another soft labor market reading,” said Edward Moya, senior market analyst at OANDA. “If Wall Street sees a soft NFP report tomorrow, you can kiss the chance of one more Fed rate hike this cycle goodbye.”

On Friday, the Labor Department is scheduled to release its closely watched report on employment in the month of October.

Economists currently expected employment to increase by 180,000 jobs in October after surging by 336,000 jobs in September. The unemployment rate is expected to remain at 3.8 percent.

Sector News

Banking stocks moved sharply higher over the course of the session, resulting in a 4.5 percent spike by the KBW Bank Index.

Interest rate-sensitive housing also saw substantial strength on the day, with the Philadelphia Housing Sector Index surging by 3.4 percent.

A significant increase by the price of crude oil also contributed to a rally by oil service stocks, driving the Philadelphia Oil Service Index up by 3.4 percent.

Airline, commercial real estate and telecom stocks also saw considerable strength, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index jumped by 1.1 percent, while Hong Kong’s Hang Seng Index climbed by 0.8 percent.

The major European markets also turned in a strong performance on the day. While the French CAC 40 Index surged by 1.8 percent, the German DAX Index and the U.K.’s FTSE 100 Index shot up by 1.5 percent and 1.4 percent, respectively.

In the bond market, treasuries moved sharply higher, extending the notable advance seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 12.0 basis points to 4.669 percent.

Looking Ahead

While the monthly jobs report is likely to be in the spotlight on Friday, earnings news may also attract attention, as tech giant Apple (AAPL) is among the companies releasing their quarterly results after the close of today’s trading.

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