The Nasdaq fell on Wednesday, driven by a decline in Nvidia shares and concerns over a potential rate hike. Nvidia, one of the Magnificent Seven megacap stocks that led this year’s stock rally, dropped 4.7%, causing a dip in the tech-heavy Nasdaq. Despite this, the index has still gained about 32.5% this year, boosted by optimism surrounding artificial intelligence and hopes of a soft landing for the US economy amidst the Federal Reserve’s interest rate hikes.
However, Wall Street saw a rise on Thursday following the release of July consumer prices data, which showed a milder-than-expected increase. The consumer price index (CPI) for July rose 3.2% on an annual basis, slightly below economists’ predictions of a 3.3% rise. Furthermore, when excluding volatile components such as food and energy, prices only increased 4.7% in the 12 months leading up to July, compared to a 4.8% rise in the previous month.
In addition to the CPI data, the number of Americans filing new claims for unemployment benefits also rose slightly, with 248,000 additions compared to estimates of 230,000. Despite this, traders remain optimistic that the Federal Reserve has completed its aggressive interest rate hike campaign, with expectations of another rate hike in the coming months falling below the 30% mark.
Neil Birrell, Chief Investment Officer at Premier Miton Investors, stated that the July inflation figures were broadly as expected and that there is nothing in this release to suggest that the Federal Reserve will deviate from keeping interest rates unchanged. These factors helped alleviate concerns about rate-sensitive growth stocks, pushing the yield on the 10-year US Treasury note down to 3.98%.
As a result of the positive CPI data, Wall Street saw gains, with the Dow Jones Industrial Average rising 335.30 points or 0.95%, the S&P 500 increasing by 40.72 points or 0.91%, and the Nasdaq Composite climbing 143.56 points or 1.05%.
Among the 11 major S&P 500 sectors, all advanced, with the communication services sector leading gains. Meta Platforms and Alphabet were key contributors to the sector’s 1.2% increase. In terms of earnings, Walt Disney saw a 1.0% rise after surpassing Wall Street estimates for quarterly adjusted profit per share.
In other news, Capri experienced a significant surge of 56.8% following Tapestry’s announcement of its plans to acquire the parent company of Michael Kors in an $8.5 billion deal. Tapestry, on the other hand, witnessed a 9.1% decline in its shares. US-listed shares of Alibaba also saw growth, increasing by 5.5% after reporting positive quarterly sales due to improved consumer sentiment.
Furthermore, trade concerns were heightened as President Joe Biden signed an executive order prohibiting certain US investments in China’s sensitive technology sectors and requiring government notification for investments in other tech sectors.
To summarize, despite the Nasdaq’s decline on Wednesday, there was a market recovery on Thursday as July consumer prices data came in milder than anticipated. The Federal Reserve’s interest rate hike campaign may be nearing its end, leading investors to remain optimistic about the prospects of the US economy.
