By
Steve Muchoki
April 16th, 2024
On Wednesday, both the indices surged up to 1% as bullish economic news drives optimism on Wall Street.
The US stock indices are playing a flip flop. Dow Jones (INDEXDJX: .DJI) and the S&P 500 (INDEXSP: .INX) have remained volatile this week. After registering major losses on Tuesday, both indices surged back on Wednesday, September 15. Dow Jones gained 0.7% or 236 points ending Wednesday’s trading session at 34,814 levels, similarly, the S&P 500 also gained 0.8% closing at 4480 levels.
So far, the month of September has been of volatility and selling pressure. Concerns about the slowdown in economic growth also hover around. For this month, Dow Jones has been down by 1.5% and the S&P 500 has been down by 0.9%. Since January 2021, this is the first month that the S&P 500 has been trading in the negative.
The S&P 500 has dipped below the 50-day moving for the first time as per FundStrat. Mike Wilson, chief investment officer at Morgan Stanley, told CNBC:
“The midcycle transition always ends with a correction in the index. Maybe it’ll be this week, maybe a month from now. I don’t think we’ll get done with this year, however, with that 50-day moving average holding up throughout the year because that’s the pattern we typically see in this part of the recovery phase.”
Furthermore, all eyes are on the Fed commentary next week whether if the central back cuts down on easing its central policy. In a note to clients on Wednesday, JPMorgan strategist Dubravko Lakos-Bujas wrote:
“Despite concerns about the recent downshift in economic and business cycle momentum, we remain confident that strong growth lies ahead and activity is bound to re-accelerate. We remain positive on the equity outlook, and expect S&P 500 to reach 4,700 by end of this year and surpass 5,000 next year on better than expected earnings.”
S&P 500 and Dow Jones React to Bullish Economic News that Drive Optimism
Some positive news on the US economy brought some optimism to Wall Street on Wednesday. the New York Fed’s Empire Index highlighting the region’s manufacturing activity came at 34.3 for the month of September. This was way above the FactSet estimates of 18.
On Wednesday, the WTI crude price surged leading to a price rally in energy stocks. ExxonMobil added 3.3% while the entire Energy Select Sector SPDR ETF gained nearly 3.7%.
Also, the bank stocks remained on the upbeat with the rising US Treasury Yields. Citigroup stock was up 2.4% while Morgan Stanley gained 1.1%. Higher interest rates will provide a boost to the bank’s bottom line.
Furthermore, Microsoft (NASDAQ: MSFT) stock was up 1.6% while announcing an increase in dividends. Besides, the tech giant also announced a $60 billion share repurchase program.