Dow jumps nearly 500 points as stocks extend post-Fed gains

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U.S. stocks traded higher on Thursday, extending gains a day after the Federal Reserve offered no surprises, signaling that it is on track to start scaling back bond purchases this year, and perhaps raise interest rates next year, assuming a continued economic recovery from the pandemic.

How are stock-index futures trading?

  • The Dow Jones Industrial Average rose 470.67 points, or 1.4%, to 34,728.99.
  • The S&P 500 gained 55.13 points, or 1.3%, to trade at 4,450.77.
  • The Nasdaq Composite traded at 15,048.65, up 151.81 points, or 1%.

On Wednesday, the Dow Jones Industrial Average rose 338 points, or 1%, to 34,258, while the S&P 500 and the Nasdaq Composite also rallied 1%. . Daily gains for the Dow and S&P 500 were the strongest in two months.

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What’s driving the market?

Equities were rising a day after Fed Chairman Jerome Powell said plans to taper the central bank’s bond- buying program could be announced in November, and officials also penciled in an interest-rate increase in 2022. Still, the Fed didn’t upset the market’s apple cart, said observers.

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“A repeat of the taper tantrum, which hurt both equities and fixed income in 2013, is unlikely because the Fed has been so clear about how slowly it is removing support,” said Scott Ruesterholz, a portfolio manager at Insight Investment, which has over $1 trillion in assets under management.   

“While the Fed tailwind for markets is diminishing, it remains a tailwind. Combined with the significant excess liquidity in the financial system, that should continue to provide strong technical support for fixed income and markets,” said Ruesterholz, in emailed comments.

In U.S. economic data Thursday, the Labor Department said initial claims for jobless benefits rose by 16,000 to 351,000 in the week ended Sept. 18. Economists polled by The Wall Street Journal had estimated new claims would total 320,000. The rise appeared to be driven in party by California catching up on a large backlog of claims.

Private-sector activity in the U.S. economy continued to expand but at a slower pace September, according to the IHS Markit flash U.S. Composite Output Index, which fell to a 12-month low of 54.5, down from 55.4 in August. A reading above 50 indicates an expansion in activity.

The Conference Board said its Leading Economic Index rose 0.9% in August to 117.1.

The White House on Thursday will host a virtual meeting to discuss the global computer chip shortage, with the CEO of Intel Corp.  joining executives from Apple Inc. Microsoft Corp. Ford Motor Co.  and others, Reuters reported Wednesday.

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Worries around China Evergrande the property giant whose indebtedness sparked a global equity meltdown earlier this week, appear to have moved into the background. Shares of the company rose 17% in Hong Kong as that market reopened after a holiday.

Investors are waiting to hear if Evergrande will make an $83.5 million coupon payment due Thursday on its U.S. dollar bonds. Markets welcomed news on Wednesday that its property business would make an interest payment on an onshore bond. 

The Wall Street Journal reported Thursday that Beijing remained reluctant to bail out the developer, tasking local governments with preventing unrest and mitigating the ripple effect on home buyers and the broader economy.

Meanwhile, global investors were cheered as the People’s Bank of China injected another 110 billion yuan, or $17 billion, into the financial system on Thursday, according to news reports, after a large injection on Wednesday.

Which companies are in focus?

  • Shares of Inc. rose more than 5% after the customer relationship management software company boosted its fiscal 2022 revenue outlook and provided 2023 guidance that was above expectations.
  • Darden Restaurants Inc. on Thursday reported fiscal first-quarter earnings that beat expectations and announced a new buyback program. Shares of the restaurant company rose 7.2%.
  • Shares of BlackBerry Ltd. were up nearly 14% after the cybersecurity and Internet-of-Things company exceeded Wall Street expectations when it reported fiscal second-quarter results late Wednesday.

How are other markets trading?

  • The yield on the 10-year Treasury note rose 3 basis points to 1.36%.
  • The ICE U.S. Dollar Index a measure of the currency against a basket of rivals, was down 0.5%.
  • Oil futures edged higher, with the U.S. benchmark up 1.1% to $73 a barrel. Gold futures dropped 1.4% to around $1,754.50 an ounce.
  • In Asia, Hong Kong’s Hang Seng Index reopened after a one-day holiday to a 1.1% gain, while China’s CSI 300 index rose 0.6% and Japan’s Nikkei 225 index was closed for a holiday.
  • In Europe, the Stoxx Europe 600 index rose 1.1%, while the FTSE 100 index was flat.
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