Dow Jumps 400 Points As Stocks Rebound Thanks To Solid Earnings, Upbeat Economic Data

Topline

The stock market rallied on Wednesday, reversing losses from earlier in the week on stronger-than-expected economic data that helped offset lingering recession fears, even as Federal Reserve officials continue to pledge to further rate hikes to bring inflation down.

Highlights

Stocks rebounded from back-to-back losing sessions earlier this week: The Dow Jones Industrial Average rose 1.3%, more than 400 points, while the S&P 500 rose 1.6% and the Nasdaq Composite, very technology, 2.6%.

Markets received a boost after a surprise rebound in the U.S. services sector in July, with the ISM Non-Manufacturing Purchasing Managers Index hitting 56.7, down from 55.3 last month and 54 expected by economists.

Investors also applauded comments by St. Louis Federal Reserve Chairman James Bullard, who told CNBC on Wednesday that the U.S. economy was “not in a recession right now” and that the Fed would continue to rise. interest rates to lower inflation.

Shares of vaccine maker Moderna jumped 16% after posting strong quarterly profits and announcing $3 billion in share buybacks, while shares of coffee chain Starbucks jumped nearly 5% after also exceeded expectations.

Shares of popular stock-trading app Robinhood, meanwhile, jumped 13%, despite the company cutting 23% of its workforce, thanks to optimism from Wall Street analysts who cheered cost reduction measures.

Tech stocks led the market higher on Wednesday, with giants like Apple, Amazon and Alphabet all up 2% or more, while consumer stocks also largely rallied.

Crucial quote:

It’s “extremely impressive” that stocks are rising as Treasury yields continue to climb for the second day in a row, notes Vital Knowledge founder Adam Crisafulli. More hawkish comments from Fed officials, combined with strong services data, are driving “broad” gains in the S&P 500 sectors, all of which ended higher except for energy.

Tangent:

Shares of Hong Kong-based fintech company AMTD Digital plunged 50% on Wednesday, a day after surging 126%. The under-the-radar company has little revenue but an astronomical valuation of over $200 billion, prompting some pundits to call it the new “perfect meme stock.”

Key context:

Investors shrugged off recent worries about rising tensions between the United States and China, which weighed on markets in the previous session. House Speaker Nancy Pelosi (D-Calif.) traveled to the democratically-ruled island of Taiwan on Tuesday, a move condemned by China, which claims the territory as part of its country.

Further reading:

Here’s why more Fed officials are warning that the market is getting ahead of itself (Forbes)

The Dow drops 400 points amid US-China tensions after Pelosi’s visit to Taiwan (Forbes)

AMTD Digital may be the new “perfect meme stock,” losing $70 billion in value in one day after rising more than 125% (Forbes)

Stocks fall after the market’s best month since 2020, oil prices plunge 5% (Forbes)

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