S&P 500 ends sharply higher, jobs data fuels interest rate optimism

It’s too bad that Monday’s experts all said that the last week of summer should not be trusted, because so far, the last week of summer has been fantastic.  All the indexes were way up all day in triple-digits again as investors decided to take an even more positive stance on Powell’s remarks last week and the fact that today’s job openings report came in with a decline for the third month in a row hiked the optimism that “maybe interest rate hikes are indeed behind us.” There are now 87% odds (vs yesterday’s 80%) that the rate pause will continue into September and 54% odds it will continue into November. The PCE report is due Thursday, the payrolls report Friday, both of which are hoped to clarify rate hike likelihoods. As predicted yesterday, volume does continue on the light side at 10 billion. 

S&P 500 ends sharply higher, jobs data fuels interest rate optimism

By Shristi Achar A and Noel Randewich

Tue August 29, 2023 4:26 PM

DJ: 34,559.98  +213.08        NAS: 13,705.13  +114.49       S&P: 4,433.31  +27.60     8/28

DJ: 34,852.67  +292.69        NAS: 13,943.76  +238.63       S&P: 4,497.63  +64.32     8/29

Aug 29 (Reuters) - Wall Street ended sharply higher on Tuesday, lifted by Tesla, Nvidia and other megacap growth stocks after a drop in monthly job openings cemented expectations of a pause in interest rate hikes by the U.S. Federal Reserve. The S&P 500 logged its strongest one-day gain since June 2, while the Nasdaq notched its strongest session since July 28, and both indexes closed at more than two-week highs.  The sharp gains came after the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed the number of job openings stood at 8.827 million in July, falling for the third straight month and signaling easing labor market pressures.  Investors also parsed a report from the Conference Board showing consumer confidence in the United States fell to 106.1 in August, compared with expectations of 116.  Interest rate futures signaled an 87% chance the Fed will keep rates steady at its September meeting and a 54% chance it will keep rates on hold through November, according the CME Group's FedWatch tool.

"Investors are of the mindset that 'You know what, maybe interest rate hikes are indeed behind us. So let's buy back into stocks,'" said Sam Stovall, chief investment strategist at CFRA Research.  The yield on the 10-year Treasury note eased to 4.11%, while that on the two-year note fell back below 5% after hovering around that level for the past few sessions.

The decline in yields supported growth stocks, with Nvidia (NVDA.O) climbing 4.2% to close at its highest ever.  Tesla (TSLA.O) rallied 7.7%, even after documents showed a U.S. regulator sent a special order to the electric vehicle maker asking questions about changes to the driver monitoring system for its Autopilot software.  Nvidia and Tesla led in turnover on Wall Street, with over $33 billion traded in each stock.  Alphabet (GOOGL.O) received a 2.7% boost from a swath of fresh artificial-intelligence technology and partnerships unveiled by the Google-parent. 

The S&P 500 climbed 1.45% to end the session at 4,497.63 points.  The Nasdaq gained 1.74% to 13,943.76 points, while Dow Jones Industrial Average rose 0.85% to 34,852.67 points.  All 11 S&P 500 sector indexes rose, led by communication services (.SPLRCL), up 2.46%, followed by a 2.35% gain in consumer discretionary (.SPLRCD). 

Advancing issues outnumbered falling ones within the S&P 500 (.AD.SPX) by a 8.2-to-1 ratio.

The S&P 500 posted 21 new highs and two new lows; the Nasdaq recorded 52 new highs and 115 new lows. 

Volume on U.S. exchanges was relatively light, with 10.0 billion shares traded, compared to an average of 10.7 billion shares over the previous 20 sessions.

The July non-farm payrolls report on Friday will offer investors more clarity about the state of the labor market. Focus will also be on the personal consumption expenditures index, the Fed's preferred inflation gauge, which is due on Thursday.  Lack of hawkish surprises in Fed Chair Jerome Powell's comments at the Jackson Hole symposium last week buoyed stocks on Monday, with the focus now on the upcoming economic data to gauge how long the central bank could keep interest rates elevated.

Catalent (CTLT.N) jumped almost 5% after the contract drugmaker reached a settlement with activist investor Elliott Investment Management to conduct a review.  Verizon (VZ.N) and AT&T (T.N) each gained more than 3% after Citi upgraded the telecom companies to "buy" from "neutral".  U.S.-listed shares of PDD Holdings (PDD.O) rallied over 15% after the Chinese e-commerce firm beat second-quarter revenue estimates.