Technology stock popped up on Wednesday with easing yields. Analysts still expect the Federal Reserve to proceed with a rate hike later this month.
On Wednesday, July 12, the US stock indices inched higher with the Nasdaq Composite (INDEXNASDAQ: .IXIC) and the S&P 500 (INDEXSP: .INX) hitting their highest level since April 2022.
Nasdaq Composite, S&P 500, and Dow Jones
The recent optimism in the US equities comes on the backdrop of the easing inflation and that the Federal Reserve will be able to control the inflation without pushing the US economy into recession. On Wednesday, July 12, the S&P 500 reached its highest level for the year 2023, closing at 4,472 levels.
Similarly, on Wednesday, July 12, the Dow Jones Industrial Average (INDEXDJX: .DJI) traded 86 points or 0.25% higher and closed at 34,347 levels. Similarly, the Nasdaq Composite (INDEXNASDAQ: .IXIC) popped 1.15% high closing at 13,918.96.
Bank stock rallied on Wednesday, July 12, with shares of Citigroup (NYSE: C) and Goldman Sachs (NYSE: GS) gaining 1.8% and 1.7% respectively. Similarly, regional banks also made some gains with Comerica jumping by 3.1% and Zions Bancorporation jumping by 2.8%.
Major technology companies, including Google, Microsoft, and Meta Platforms Inc, regained their momentum as Treasury yields dropped, indicating that the Federal Reserve’s interest rate hikes may be coming to an end.
Microsoft saw a more than 1% increase as it made progress in finalizing its $69 billion acquisition of Activision Blizzard, the company behind Call of Duty. A Federal judge dismissed the Federal Trade Commission’s request to delay the acquisition, stating a lack of evidence that it would harm competition.
According to Wedbush analysts, with the injunction denied, Microsoft can proceed to close the deal before July 18. If the deal were to extend beyond that date, Microsoft would be obligated to pay Activision $3 billion and renegotiate the terms.
Inflation Easing, Will Fed Go for Rate Hike?
For the month of June, the consumer price index (CPI) saw a surge of 3% year-over-year. This was well below the 3.1% expected by Dow Jones economists. Month-over-month, the index saw a jump of 0.2%, still less than the forecast. Megan Horneman, chief investment officer at Verdence Capital Advisors, told CNBC:
“I think it’s a good report. Inflation is going the way that the Federal Reserve wants it to go. But I don’t think we’re ready to say that they’re going to be able to cut rates. There’s still three areas of the inflation that the Fed’s looking at very closely – service inflation, wage inflation and housing inflation. All three of those things, while they are moderating, are still uncomfortably high.”
However, analysts are still expecting the Federal Reserve to proceed with one more rate hike by the end of the month. If economic data in the coming months, such as the Employment Cost Index on July 28 and the employment and inflation data released in August, slows down at the same rate as we have seen in the Consumer Price Index (CPI) data in the past couple of months, then the July rate hike may be the last one in this cycle, according to Jefferies.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
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