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U.S. stocks opened higher on Wednesday, with tech stocks rebounding from a sharp selloff as investors digested Federal Reserve Chairman Jerome Powell’s position that interest rate cuts by the end of the year remain likely.
The tech-heavy Nasdaq Composite Index (^IXIC) rose about 1% as tech stocks led a broader sell-off on Tuesday. The S&P 500 (^GSPC) rose more than 0.6% and the Dow Jones Industrial Average (^DJI) rose 0.5%. Both indexes experienced declines of more than 1%.
Mr. Powell’s subsequent testimony to Congress stoked bubble fears by hitting Apple (AAPL) and Tesla (TSLA), two of the leading companies in the Magnificent Seven, and boosted stock prices after two days of losses. It is possible to give
Investors will be listening closely to see if Powell departs from the repeated message from Fed policymakers that there is no rush to cut rates. Prepared testimony released Wednesday morning revealed that Mr. Powell plans to tell lawmakers that a rate cut is likely warranted “at some point” in 2024. Investors will be looking for further clarity on the issue from Mr. Powell as he takes questions from lawmakers over the next two days.
“If the economy progresses broadly as expected, it would be appropriate to begin tapering policy restraints at some point this year,” Powell told the House Financial Services Committee.
Among individual stocks, CrowdStrike (CRWD) stock continued its post-earnings rally, rising more than 17% after the cybersecurity company’s outlook suggested healthy demand for the sector. Other cybersecurity stocks also rose as a result, including Zscaler (ZS).
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Bring in Jerome Powell
Set your level in case you haven’t reached it yet.
This year could end with no rate cuts, in contrast to the six rate cuts expected in early January. It’s interesting to see the market still swinging as interest rate expectations rise. It’s good to see investors embracing the positive economic data.
You’ll hear the Fed’s Jerome Powell continue his recent Fedspeak drumbeat on interest rates in testimony to Congress today.
For economists at Goldman Sachs, 2024 is shaping up to be the year of rate cuts everywhere.
“Major DM [developed market] “Central banks are expected to cut interest rates in at least three consecutive meetings starting in June, and economies where growth remains below trend, such as the euro area and the UK, will continue to do so,” Goldman’s chief economist said. “Countries with strong economic activity, such as the United States, will see a slowdown.” Jan Hatzius.
That begs the question. Is it time to switch from more expensive US stocks to European stocks?
Goldman expects the pace of interest rate cuts to pick up in markets outside the United States. (Goldman Sachs)
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