Stocks Extends Sharp Gains: Dow Jumps 500 Points
4:12 pm Thursday, September 23rd, 2021
U.S. stocks jumped more than 1% on Thursday as investors appeared relieved about the Federal Reserve’s stance on tapering stimulus and raising interest rates.
The rebound gains have spread to ten of the 11 S&P 500 sectors, especially the energy (+3.5%) and financials (+2.7%) sectors amid higher oil prices and curve-steepening activity to the upside. The real estate sector (-0.4%) is the only sector trading lower.
Buying efforts have been supported by several macro factors, including 1) an observation that the Fed is still going to be accommodative for the foreseeable future, even when it starts to taper asset purchases, 2) a contention that Evergrande’s debt issues won’t hurt the global financial system, and 3) a recognition that the four-week trend for weekly jobless claims continues to decline.
On a technical basis, risk sentiment could get a boost if the S&P 500 can close above its 50-day moving average. On the corporate front, salesforce.com (CRM), Accenture (ACN), and Darden Restaurants (DRI) provided upbeat full-year guidance.
As mentioned, the Treasury market has corroborated the good vibes in the stock market, with investors selling longer-dated maturities amid an upbeat economic outlook. The 10-yr yield is up seven basis points to 1.40% while the 2-yr yield is unchanged at 0.24%. The U.S. Dollar Index is down 0.5% to 93.03.
Another good sign is that the CBOE Volatility Index has dropped below 19.00 after touching 28.79 early this week.
Separately, while Congress still needs to fund the government, address the debt ceiling, and settle differences on infrastructure, the market isn’t too worried about those issues right now.
