Markets turn optimistic on US stocks as Treasury yields fall
- US stocks gain as Treasury yields roll over on doveish Fedspeak.
- Fed's Waller sounds likely to hold rates during Reuters interview.
- Oil prices remain high but stable as US and Iran trade attacks.
- Nvidia buys Hugging Face for just shy of $13 billion.
The US stock market is experiencing a buoyant Thursday as all three major equity indices rose more than 1% by lunchtime in New York. Equities were assisted by falling US Treasury yields, which came down across tenures but particularly in the 12-month and 2-year maturities.
The culprit was Federal Reserve (Fed) Governor Christopher Waller, who insisted that he was leaning toward holding interest rates unchanged at the central bank's September 16 meeting. Many on Wall Street believe that Waller is the tie vote for a hike or hold.
"If there is continued progress toward our 2% goal, then I am willing to support holding the policy rate at its current level," Waller said during a Reuters virtual event. "But if inflation comes in hot, I would consider a rate hike."
Waller specifically mentioned the Producer Price Index (PPI) and Consumer Price Index (CPI) data for August that comes out next week, noting that he expects inflation to be controlled despite rising labor and energy prices.
Equities make gains despite higher Oil prices
As the US and Iran have continued to trade missile and drone attacks this week in response to the ever-present jostling over control of the Strait of Hormuz, Oil (WTI) remains near six-week highs. On Thursday, WTI has risen half a percentage point to $89.50. This is about 5% higher than one month ago and 56% higher than a year ago.
But the stock market has already priced in the continued toll of the war as the S&P 500 has lost ground in nine of the most recent 15 sessions. Instead, the market wants to congratulate itself over the continued success of the AI boom.
On Thursday, Nvidia (NVDA) announced the completion of its nearly $13 billion acquisition of open-source AI platform Hugging Face. Nvidia shares have risen 1.5% at the time of writing.
The Communication Services sector is the biggest outperformer on Thursday with Alphabet (GOOG) and Meta Platforms (META) both leading the sector higher.
As the AI boom rambles on, a joint report from Azuria Capital and Bloomberg claims that capital expenditure as a share of operating cash flow for top technology companies has officially overtaken that of Gold and Silver miners for the first time in modern history.
AI was the primary reason why cloud data company Snowflake (SNOW) saw its share price spike over 20% on Thursday. After easily beating Wall Street consensus for its quarterly earnings late Wednesday, the market took note of the heavy growth Snowflake has been seeing in its AI-coding agent Cortex Code. Management called it the easiest product to sell that it has ever released.
S&P 500 daily chart
The S&P 500 has bounced off support at 7,620 this week. The index descended to that level, which had been resistance on June 2, on Tuesday, and has climbed subsequently on Wednesday and Thursday of this week.
The index is now likely to rise to the 7,800 level in the next few sessions. The August 5 high at 7,793 is one point of resistance, and the August 13 all-time high at 7,816 is another.
Undergirding the steady upward-trending pressure to hit new highs is the 50-day Simple Moving Average (SMA), which has reached 7,584.
Author
Clay Webster
FXStreet
Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.
