Stocks Surge as Bond Yields Drop on Fed Outlook

August 23, 2024 10:20 AM PDT | By Team Kalkine Media

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Stocks Surge as Bond Yields Drop on Fed Outlook — Image source: Shutterstock

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Headlines

Stocks Rise on Fed Rate Cut Hints

Bond Yields Dip, Boosting Market Rally

Workday and Chip Stocks Lead Gains

US stock indices are showing gains today. The S&P 500 Index is up by 0.81%, the Dow Jones is up 0.87%, and the Nasdaq 100 has increased by 0.79%. The Dow Jones has reached a three-week high, propelled by a decline in bond yields influenced by Federal Reserve comments.

Fed Chair Jerome Powell's remarks have caused bond yields to drop, supporting the rise in stock prices. Powell indicated that cooling labor market conditions and a favorable inflation outlook suggest it may be time for a policy adjustment. His comments have increased speculation about a potential interest rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on September 17-18.

Support for this positive sentiment came from Atlanta Fed President Raphael Bostic, who suggested that more than one rate cut could be necessary by the end of the year due to slower-than-expected inflation.

The decline in bond yields has particularly benefited chip stocks, contributing to the broader market rally. Workday's strong performance, up more than 10% following impressive Q2 earnings and an optimistic profitability outlook, further fueled the market. The company's forecast of increased profitability over the next three years is viewed positively by investors.

In the housing sector, July new home sales surged by 10.6% month-over-month, reaching a 14-month high of 739,000 units, surpassing expectations.

Global markets are also reflecting positive trends. The Euro Stoxx 50 has reached a one-month high, China's Shanghai Composite has recovered from a recent low, and Japan's Nikkei Stock 225 has achieved a three-week high.

European government bond yields have decreased as well, with the 10-year German bund yield falling to 2.224% and the 10-year UK gilt yield dropping to 3.918%. The European Central Bank's inflation expectations for the Eurozone remain stable, supporting the outlook for potential monetary policy adjustments.

In US stock movements, chip stocks are leading gains, with Nvidia(NASDAQ:NVDA), Marvell Technology (NASDAQ:MRVL), and GlobalFoundries all showing significant increases. Homebuilding stocks are also benefiting from lower bond yields and strong new home sales data, with Builders FirstSource and PulteGroup among the notable gainers.

Workday is a standout performer, with its stock climbing over 11% after reporting better-than-expected earnings and a positive outlook. Moderna also saw a slight increase following the European Commission's approval of its RSV vaccine for use in the EU.

Cava Group's stock surged by more than 16% after raising its full-year sales forecast, exceeding initial expectations.

Overall, the market is buoyed by a favorable economic outlook and positive corporate earnings news, driving the upward trend in stock prices.

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