The Largest Daily Jump in S&P and Nasdaq Indices Since February, FED Keeps Interest Rates Unchanged

On Wall Street, the S&P 500 and Nasdaq indices achieved their largest daily rise since February 22 on Wednesday, supported by a surge in chip manufacturers’ stock prices and the Fed signaling that it might lower interest rates in September if inflation eases.

The Dow Jones index rose 0.24 percent to 40,842 points on Wednesday. At the same time, the S&P 500 index jumped 1.58 percent to 5,522 points, while the Nasdaq increased by 2.64 percent to 17,599 points.

In July, the S&P 500 rose by 1.1 percent, the Nasdaq by 0.8 percent, while the Dow Jones jumped by 4.4 percent.

The Fed announced on Wednesday, after a two-day meeting, that it kept interest rates unchanged, ranging between 5.25 and 5.5 percent, but opened the door for a monetary policy easing at its September meeting, seven weeks ahead of the U.S. presidential elections, which will be held in November. The signaling of a rate cut affected the yield on 10-year U.S. Treasury notes, which fell from 9.8 to 4.043 percent.

– It was the worst-kept secret on the planet that the Fed would not lower rates in July. The Fed will have its shining day in September when it will lower interest rates by 25 or 50 basis points, but I wouldn’t be surprised if that is already priced into stock prices – emphasizes Jake Dollarhide, CEO of investment firm Longbow Asset Management.

During the press conference, Fed Chairman Jerome Powell stated that monetary policymakers discussed lowering interest rates, but that a “large majority” felt that now was not the right time.

– Powell’s statement itself didn’t move the needle, but listening to him speak, it was clear that they concluded they would deliver a rate cut in September – said Mark Malek from Siebert Next.

The biggest winner was Nvidia’s stock, which jumped nearly 13 percent, supported by an optimistic sales forecast for 2024 for AI chips from AMD, whose stock prices rose by 4.3 percent.

Microsoft’s stock price fell by 1 percent after reporting revenues from its AI business segment below market expectations, while Meta’s stock rose by 5 percent after the market closed, following the announcement of strong business results.

European stock prices also rose on Wednesday. The Frankfurt DAX rose by 0.53 percent to 18,508 points, the London FTSE by 1.13 percent to 8,367 points, and the Paris CAC by 0.76 percent to 7,531 points.

Increased Risk Appetite Strengthens Asian Markets

On Asian markets on Thursday, most regional indices rose, following the recovery of technology stock prices supported by Meta and Nvidia, while the prospects of U.S. interest rate cuts strengthened the global bond market and oil prices.

The MSCI Asia-Pacific index was up 0.7 percent around 6:30 AM, finishing July without major shifts. The MSCI regional IT company index jumped by 2 percent.

However, the Japanese Nikkei fell by 2.6 percent due to the prospects of further tightening of Japanese monetary policy, which raises the yen’s exchange rate, typically deterring investors from investing in stocks. A stronger yen erodes the competitiveness of Japanese exports in the global market.

Chinese stock indices also slightly weakened, by about 0.2 percent, after a survey by a private company showed that the Chinese industrial sector recorded an unexpected decline in activity in July, which is a bad signal regarding the momentum of the world’s second-largest economy.