The stock market on Wall Street experienced a significant rally on Wednesday, marking its best day since June. This surge comes as the pressure on stocks from the bond market begins to ease. The S&P 500 saw a 1.1% climb, reducing its losses for August, which has been a disappointing month so far. The Dow Jones Industrial Average saw a 0.5% increase of 184 points, while the Nasdaq composite jumped 1.6%. The main driving force behind this rally was the Big Tech stocks and other companies that benefit from lower interest rates. These stocks received some relief as the 10-year Treasury yield eased back from its highest level since 2007, following a report suggesting a potential cooling down of the US economy.
Leading the upward movement of the S&P 500 were Apple and Microsoft, with respective stock gains of 2.2% and 1.4%. Nvidia, another influential stock in the market, also rallied 3.2% ahead of its highly anticipated profit report. Earlier this year, Nvidia, along with a few other companies, were responsible for a majority of the gains seen in the S&P 500. However, they have faced increasing pressure recently as bond yields rise. When bonds offer higher interest rates, investors are less inclined to pay high prices for stocks and other investments that may experience significant price fluctuations. The easing of Treasury yields on Wednesday helped alleviate some of this pressure.
A preliminary reading of US services and manufacturing businesses revealed a six-month low, causing yields to decrease across the bond market. While this measure still indicates growth, it is less than expected due to inflation and higher interest rates hindering activity. Currently, softer-than-expected economic data is viewed positively by financial markets. This is because a series of unexpectedly strong reports has raised expectations for the Federal Reserve to maintain higher interest rates for a longer period of time.
Toll Brothers, a homebuilder on Wall Street, saw a 3.9% increase in its stock after reporting stronger-than-expected profits for the latest quarter. The company had previously struggled alongside the housing industry, which experienced decreased activity due to high mortgage rates. Conversely, Foot Locker saw a 28.3% decline in its stock after reporting weaker profits for the latest quarter. The company also halted its dividend payments and lowered its financial forecasts for the full year, attributing this to a “still-tough consumer backdrop.”
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