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Wall Street Bounces Back: A Surge Amid Fed Rate Hike Concerns

Wall Street breathes a sigh of relief as robust economic data quells recession fears triggered by aggressive Federal Reserve rate hikes.

Wall Street sign
Wall Street sign

Positive Economic Indicators Stimulate Confidence

On Tuesday, US stock indexes experienced a strong rebound following a period of losses. This turnaround was largely attributed to favorable economic data that eased investors' concerns about a possible imminent recession due to the Federal Reserve's aggressive interest rate increases. Fresh reports revealed a surprising rise in new orders for key US-manufactured capital goods in May. Similarly, sales of new single-family homes experienced a surge in the same month, while US consumer confidence soared to a near one-and-a-half-year high in June.

Resilient US Economy Pushes Indices Higher

Senior portfolio manager at Dakota Wealth, Robert Pavlik, commented, "All the data we have confirms to investors that the economy has weakened but not collapsed." This evidence of robustness in the US economy was instrumental in pulling the blue-chip Dow out of a six-day slump. It also gave a boost to the Dow Transports index, the small-cap Russell 2000 index, and pushed the PHLX Housing index up by 2.8% to reach a record high.

Anticipation for Federal Reserve's Future Decisions

As of now, traders predict a 79.4% probability that the Fed will raise interest rates by 25 bps to the 5.25%-5.50% range in its July meeting, as per the CME Group's Fedwatch tool. Further economic data expected this week, including a key inflation measure, alongside a speech by Fed Chair Jerome Powell, could offer more insights on the future direction of interest rates.

Growth Stocks Rally Amid Market Volatility

Despite the market’s recent weaknesses, a rally in growth stocks, buoyant earnings reports, and expectations of the Fed ceasing its monetary tightening soon have put the main indexes on the path to quarterly gains. The tech-centric Nasdaq is even expected to record its best first-half performance in four decades with a nearly 29% gain.

Stock Movements: The Winners and Losers

As of midday Tuesday, significant growth was seen in the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite. Major market players like Amazon, Tesla, and Nvidia each saw about a 1% rise. Meanwhile, Meta Platforms jumped 3.0% following Citigroup's price target hike for the stock. Cloud data analytics company Snowflake rose 3.1% after announcing a partnership with Nvidia. However, it wasn't good news for all; Walgreens Boots Alliance dropped 9.7% on lowered profit forecast while electric truck manufacturer Lordstown Motors filed for bankruptcy protection, seeing its stocks slump by 36.9%.

Market Dynamics: Advances Outnumber Declines

On the NYSE and Nasdaq, advancing issues outnumbered decliners by a 2.74-to-1 ratio and a 1.52-to-1 ratio respectively. The S&P index recorded 36 new 52-week highs and one new low, while the Nasdaq saw 43 new highs and 120 new lows.