By
Svetlana Soroka
April 18th, 2024
Yesterday’s higher stocks close indicates that the US economy is holding up amid the Fed’s interest rate hike agenda.
On Wednesday, stocks climbed and ended the day on a higher close as traders pondered how strong retail sales could impact future interest rate hikes. In addition, market observers and participants also tried to determine how much influence the latest US inflation data would have on Federal Reserve rate hikes.
The Dow Jones Industrial Average (DJIA) inched higher by 0.11%, or 38.78 points, representing an intraday rally of more than 200 points. This development saw the major stock market index close at 34,128.05, with the S&P 500 also climbing 0.28% to 4,147.60. The S&P’s higher close was helped by shares of leading energy tech company Generac (NYSE: GNRC) and leading solar power purveyor SolarEdge (NASDAQ: SEDG). On Wednesday, Generac’s stock gained 8%, while SolarEdge’s valuation grew by 9.05%.
Meanwhile, the tech-laden Nasdaq Composite increased by 0.92% to close at 12,070.59. The index’s marginally higher close received major assistance from the shares of short-term homestay specialists Airbnb (NASDAQ: ABNB), which increased 13.35%. Airbnb’s latest stock surge also surpassed the company’s earnings expectations for the period.
The Nasdaq’s rise also benefited from gains in EV players, including Tesla (NASDAQ: TSLA), Rivian (NASDAQ: RIVN), and Lucid (NASDAQ: LCID).
Stocks Eventually Close Higher amid January Retail Report
Stocks slipped earlier yesterday following a January retail report. According to this report, retail sales grew 3%, while polled Dow Jones economists expected an increase of 1.9%. These metrics suggest that the US economy is adequately enduring the effects of the Fed inflation-induced rate hikes.
Weighing in on this development, Independent Advisor Alliance chief investment officer Chris Zaccarelli explained:
“The labor market’s resilience is the main reason consumers continue to spend, and as long as that’s the case, inflation is likely to remain sticky.”
Zaccarelli also added:
“The Fed is going to need to raise rates higher – and hold them higher for longer – than people currently expect, and this is going to cause markets to go through some significant volatility as stock and bond markets are priced for benign scenarios and not the more difficult one that we are headed towards.”
The Wednesday retail sale report comes on the heels of the recent US inflation report. According to this report, January’s consumer price index was slightly higher than economists’ estimates. The implication of this development could mean that the Federal Reserve still has some way to go to rein in surging prices. Mike Loewengart, Morgan Stanley‘s Global Investment Office head of model portfolio construction expressed worry about whether inflation will drop. Loewengart said:
“The question remains if inflation will be able to fall to the Fed’s target levels with the labor market as tight as it currently is.”
Market Traders, Observers Look to Take Cues on Fed Rate Hike Campaign Continuously
Traders would likely listen to speeches from Fed officials later this week for cues regarding the Federal Reserve’s next move. The US apex bank has another fiscal meeting slated for March.
Meanwhile, companies on the major stock indices continue to post their latest quarterly results. As it stands, three-quarters of the companies listed on the S&P 500 have posted their results. Of these firms, 69% have already surpassed earnings expectations. According to The Earnings Scout, this is below the three-year average beat rate of 79%.