US stocks rally to break 2-session losing streak

  • Wall Street’s major stock indexes closed higher on Thursday after two days of declines.
  • St. Louis Fed President James Bullard said the central bank was “behind” on tackling inflation.
  • Stocks appeared to accept Bullard’s view that the Fed needs to raise rates by 3 percentage points this year.

U.S. stocks reversed higher on Thursday as investors halted a sell-off that ran for two straight sessions and accepted risk even as a


Federal Reserve

official said the central bank should be aggressive in raising interest rates.

The Nasdaq Composite recovered some of the 2% drop it suffered on Wednesday, and the S&P 500 and Dow Jones Industrial Average joined the tech-focused index in rising for the first time in three sessions.

Stocks overcame earlier losses and appeared to absorb remarks from St. Louis Fed Chairman James Bullard, who reportedly said on Thursday that the Fed was “overdue” in the fight against inflation. He said the central bank will need to raise interest rates another 3 percentage points by the end of 2022, according to Reuters. In March, the Fed raised its federal funds rate by 25 basis points from zero.

A key part of the yield curve also steepened on Thursday. The 10-year yield rose 5 basis points to 2.65%, while the 2-year yield fell 2 basis points to 2.45%. The spread between the 10-year yield and the 2-year yield had reversed briefly in recent days to send a


recession

Warning.

Here’s where the US indices were at 4:00 p.m. Thursday:

Stocks fell on Wednesday after minutes from the Federal Reserve’s latest meeting showed policymakers agreed on the need to act “quickly” to raise interest rates to restore price stability, inflation standing at 7.9%. It also indicated that it will begin to reduce its balance sheet in May by $95 billion each month.

“The Fed has said in the past that it’s committed to flexibility, but it’s hard to see the Fed taking a tougher stance on rate hikes than the market already expects. And this disparity between market expectations and actual moves by the Fed could open the door for more relief rallies down the road,” Callie Cox, US investment analyst at eToro, said in a note late Wednesday.

“Economic and earnings data, while under pressure, looks okay, and the Fed is still mindful of the lingering risks to future growth,” she said.

Shares of Rite Aid fell after Deutsche Bank cut its price target to $1 as COVID-19 “accelerates the decline” of the company’s retail pharmacy business.

Wedbush advises investors to make big moves into technology as the sector is now oversold on fears of interest rate hikes. The company’s top picks include Apple, Microsoft, and cybersecurity names like ZScaler and Palo Alto Networks.

In commodities, JPMorgan says the sector overall has room for up to 40% more as investors are underallocated in the space.

Oil prices were stable. West Texas Intermediate crude fell 1 cent to $96.22 a barrel. Brent crude, the international benchmark, slipped a penny to $100.57 a barrel.

Gold rose 0.7% to $1,935.70 an ounce. Bitcoin rose 1.3% to $43,723.63.

Garland K. Long