US stocks rose for a second day as fears of a crisis in the Chinese real estate market eased and the Federal Reserve maintained current monetary stimulus a little longer.
The Dow Jones Industrial Average gained 577 points, or 1.6%. The S&P 500 was up 1.4% and the Nasdaq Composite was up 1%.
Thursday’s gains pushed key averages back into the green for the week. The Dow and S&P are up 0.6% and 0.5%, respectively, while the Nasdaq is up 0.06%.
“The course of the economy was uncertain and the Fed instilled some confidence in the markets yesterday,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “In addition, other risks that have weighed on investor sentiment, such as the debt ceiling and risks associated with China’s real estate market, appear to be fading, which has increased investor risk appetite.”
Salesforce topped the index, up 6% after the cloud company raised its revenue forecast for full year 2022. Darden Restaurants was among the big S&P movers, up more than 6% after reporting strong quarterly earnings.
Stocks related to a global economic rally were higher. General Electric’s shares were up about 5%. Las Vegas Sands, which has a large exposure to China, rose 4%. Caterpillar added 3%. Energy stocks led the S&P, with APA Corp up 7% and Devon Energy nearing 7%.
Bank stocks, typically viewed as cyclical stocks with performance tied to the performance of the economy, rose as US Treasury yields rose. JPMorgan, Bank of America and Citibank gained around 3%. Regional banks that tend to trade closely with 10-year-olds, such as Regions and Fifth Third, gained more than 4%.
Hong Kong’s Hang Seng index rebounded more than 1% from losses this week, with Chinese real estate developer Evergrande Group gaining more than 17%. On Wednesday, the company eased fears somewhat by deciding to pay a local bond.
However, global investors are still waiting to see if the company will pay $ 83 million in interest on a US dollar bond due Thursday. State regulators have ordered Evergrande to avoid short-term dollar bond defaults, Bloomberg News reported, citing a familiar.
At the same time, the Wall Street Journal reported early Thursday that the Chinese government is urging local authorities to prepare for a “possible storm” if Evergrande fails. Some of Evergrande’s bondholders weren’t expecting payment Thursday and hadn’t heard from the company, Reuters reported.
Also on Thursday, the Department of Labor reported that initial jobless claims rose last week as the US labor market continues its recovery from last year’s recession. There were 351,000 claims last week, beating the estimate of 320,000. The reading for the week before was 332,000.
Shares closed higher across the board on Wednesday after the Federal Reserve left policy rates unchanged while signaling no immediate intention to end economic policy. The central bank issued a statement following the meeting stating that if progress continues “as expected”, “a slowdown in asset purchases may soon be warranted”. However, there was no schedule.
The restrictive stance was welcomed by stock markets, who saw it as confirmation of the strength of the economy and continued progress in recovering from the Covid recession, said Anu Gaggar, global investment strategist with the Commonwealth Financial Network.
“While we are still a long way from quantitative easing and interest rates near zero, the tide seems to be changing,” he said. “So far the market has welcomed bad news as good news, but a market that responds to signs of an economy of its own without the monetary crutches is a refreshing change.”
The central bank ran a $ 120 billion-a-month bond purchase program last year as the pandemic paralyzed the economy. As economic conditions improve, more members of the Federal Reserve’s Open Market Committee are now seeing the first rate hike in 2022.
“While there could be some additional turmoil this fall, we are generally constructive about the US economy and believe it would be worth buying dips as fundamentals are still solid and the recession is still more than that at this point Seems like a year away, “said Chris Zaccarelli, Chief Investment Officer of the Independent Advisor Alliance.
Several companies are on deck on Thursday for quarterly updates, including Nike and Costco Wholesale, which will be reporting after the market closes.
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