Yesterday’s US session was a game of two halves. Early in the session, equities sold off after August’s US consumer price data suggested that inflation isn't cooling as fast as some traders might like, potentially making a half-point interest rate cut on 18 September less likely. Most traders now expect the Federal Reserve to cut rates by a quarter of a percentage point next week, according to the CME FedWatch tool.
However, later in the session, rate-cut concerns seemed to be pushed aside as the focus switched to the prospect of a victory for US vice-president Kamala Harris in November’s presidential election. Current president Joe Biden instigated policies such as the Inflation Reduction Act, which mandated billions of dollars in grants and subsidies for chip manufacturers to reboot the domestic chip industry and lessen America's reliance on Taiwan and other overseas suppliers. Investors appeared to warm to the idea that a Harris win could mean a continuation of state support. That said, this view arguably overlooks suggestions that increased government spending has helped push interest payments on the US national debt to $3bn a day.
Tech and consumer stocks lifted S&P 500
The S&P 500 posted a low of 5,407.09 and a high of 5,560.41 yesterday, closing at 5,554.13 to end the day up 1.07%. Information technology and consumer discretionary stocks led the way. First Solar, which makes photovoltaic chips and associated technologies, was the poster child for the rebound, its shares gapping up by almost $10 on the open to finish the day up by more than $31, or 15.19%, at $239.84.
Energy stocks continued to lag despite an attempted rally in crude oil prices. Shares in the oil and gas exploration and development business APA fell by 1% yesterday, which left the stock down more than 8.8% for the week and 16.6% for the month.
Trading volumes were evenly split between buyers and sellers. Despite the overall market bounce, there was a surplus of net new lows across the NYSE and Nasdaq exchanges. Rallies are seen as being strongest when they are supported by outsize volume.
In Europe, Spanish retail giant Inditex led the way, rallying by 4.54% after blowout earnings. The world’s largest fashion retailer outdid analyst expectations and confounded many of its rivals. Impressive as that performance was, the stock didn't retest its recent highs. The biggest loser among the Euro Stoxx 50 yesterday was L’Oreal, which fell by 2.35% as concerns about China and global growth continued to weigh on its share price.
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