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Financial Markets 10/28 15:21
NEW YORK (AP) -- The bond market swung Wednesday, while U.S. stocks ticked
higher following the Federal Reserve 's decision not to raise its main interest
rate to bring down high inflation. The bond market's moves indicated traders
see less of a chance of hikes to rates in the future that would help ease
inflation but could also hurt the economy.
The S&P 500 rose 0.3% after drifting between small gains and losses through
the day, both before and after the Fed's decision. The Dow Jones Industrial
Average added 97 points, or 0.2%, and the Nasdaq composite rose 0.3%.
The action was much stronger in the bond market, where the yield on the
two-year Treasury initially climbed after the Fed announced it was holding the
federal funds rate steady. It got above 4.79% from 4.70% late Tuesday after the
Fed said two officials actually wanted to raise the fed funds rate, only to get
outvoted by their peers.
The central bank last month raised its main interest rate for the first time
in three years in hopes of bringing down inflation, which has remained above
the Fed's 2% target for years and has been discouraging Americans broadly.
But the two-year Treasury yield, which closely tracks expectations for Fed
action, quickly reversed course. It dropped as low as 4.69% after Fed Chairman
Kevin Warsh said the central bank wanted to see how conditions play out before
making its next move.
He pointed to how rates for loans have climbed and how lenders and investors
have become "more discerning." He said the overwhelming judgment among Fed
officials at their meeting was that "monetary medicine" is "starting to work
some."
Along with signals that the U.S. economy continues to grow, Warsh said that
"broadly, these developments go in the direction" of helping the Fed achieve
its two goals of a healthy job market and relatively low inflation.
Traders on Wall Street still see further increases to rates by the Fed as
likely, but they pared back bets for how many may come by next summer,
according to data from CME Group.
The yield on the 10-year Treasury, which moves on expectations for inflation
and economic growth in upcoming years, had its own yo-yo moves following the
Fed's meeting but was largely steadier. It rose to 5.02% from 4.99% late
Tuesday.
Yields also got an upward nudge from rising oil prices as uncertainty
continues about what will happen in the Middle East and the global energy
industry. The price for a barrel of Brent crude, the international standard,
climbed 2% to $111.64.
Higher rates push downward on stock prices, which raises the pressure on
companies to deliver growth in profits to counteract that. Several companies
rallied Wednesday after joining the list of those beating analysts'
expectations for the summer.
GE HealthCare Technologies climbed 6.6% after delivering both profit and
revenue for the summer that surpassed analysts' expectations. It also raised
its forecasts for revenue growth and other financial measures for the full year.
Etsy rose 5.4% after its profit for the latest quarter blew past analysts'
forecasts. CEO Kruti Patel Goyal said the online marketplace saw growth in
active buyers from prior-year levels for the first time in two years, while its
active seller base grew at its fastest rate in two years.
Stocks in the artificial-intelligence industry were also relatively solid.
They've stabilized this week following big swings on worries that high
borrowing costs will undercut the boom in AI data centers largely built with
borrowed money.
AI stocks got a boost after a major player in the industry, South Korea's SK
Hynix, soared 10.9% in Seoul following its latest profit report. The seller of
memory chips said it's in the midst of a virtuous cycle of rising AI usage, and
it expects demand to continue to outpace supply through 2030.
On Wall Street, Micron Technology rose 5.9% and was the strongest force
lifting the S&P 500. It also sells memory for computers.
Outside of tech, Wendy's jumped 15.1% after Trian Fund Management, run by
investor Nelson Peltz, offered to buy the chain.
That helped offset a drop for Boston Scientific, which fell 5.8% even though
the seller of medical devices reported a milder drop in profit for the latest
quarter than analysts expected. It gave a forecast for profit in the current
quarter that fell short of analysts' expectations.
Robinhood Markets sank 3.3% after reporting weaker profit and revenue for
the latest quarter than analysts expected.
All told, the S&P 500 rose 21.38 points to 7,743.98. The Dow Jones
Industrial Average added 97.53 to 52,475.10, and the Nasdaq composite climbed
72.04 to 26,549.85.
In stock markets abroad, South Korea's Kospi jumped 6.6% following SK
Hynix's leap. Japan's Nikkei 225 rose 1.1%, while France's CAC 40 edged down by
less than 0.1%.
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AP Writer Elaine Lai contributed to this report.
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