Wall Street rebounds on lower yields, focuses on Fed path

Sept 7 (Reuters) – U.S. stock indices climbed on Wednesday after a recent selloff as bond yields eased, as investors await more clarity in the Federal Reserve’s monetary policy tightening plans.

The tech-rich Nasdaq (.IXIC) led the gains among major indexes and snapped a seven-game losing streak. Shares in Amazon.com Inc (AMZN.O)Tesla Inc. (TSLA.O) and Microsoft Corp. (MSFT.O) leaps.

U.S. stocks have sold off sharply since mid-August after hawkish comments from Fed Chairman Jerome Powell were compounded by signs of an economic slowdown in Europe and China and aggressive moves by major central banks to controlling inflation.

Data signaling the strength of the US economy prompted traders to bet on a 75 basis point interest rate hike by the Fed later this month. Fed funds futures implied that investors were pricing more than a 76% chance of such a move.

The 10-year Treasury yield slipped from three-month highs hit earlier in the session, boosting rate-sensitive stocks such as Tesla Inc. (TSLA.O) and Microsoft Corp. (MSFT.O).

Still, investors are looking for even more outward signs of how the Federal Reserve’s rate hikes will play out to rein in runaway inflation.

“Bond markets are doing a little better today, which gives the stock market a little better, but the big worries are still what the Fed is going to do on September 21. So we’re seeing a back and forth shooting. rope every day,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company.

Stock performance also shrugged off hawkish comments from the Federal Reserve earlier on Wednesday. Cleveland Federal Reserve Chair Loretta Mester said the high cost of rental housing in the United States has not yet fully passed through to inflation measures, suggesting that inflation could rise further. Read more

Meanwhile, Richmond Fed President Thomas Barkin said the U.S. central bank must raise interest rates to a level that restricts economic activity and hold them there until policymakers are told. “convinced” that inflation is falling, while Federal Reserve Vice Chairman Lael Brainard added that monetary policy needs to be restrictive “for a while”.

The focus will be on Powell’s speech on Thursday and US consumer price data next week for clues on the path of monetary policy.

The Fed’s “Beige Book,” a periodic snapshot of the health of the US economy, indicates that price pressures are likely to persist at least through the end of the year.

According to preliminary data, the S&P 500 (.SPX) gained 71.90 points, or 1.84%, to finish at 3,980.09 points, while the Nasdaq Composite (.IXIC) gained 246.67 points, or 2.14%, to 11,791.58. The Dow Jones Industrial Average (.DJI) rose 439.05 points, or 1.41%, to 31,583.69.

Ten of the 11 major S&P sectors were trading higher, led by a jump in utilities (.SPLRCU)reflecting the defensive positioning of investors in the face of economic uncertainties.

The energy index (.SPNY) fell as oil prices tumbled around 5% on demand concerns over looming recessionary risks. Brent crude fell below $90 a barrel. Read more

Nio Inc reversed earlier losses and ended the session higher after the Chinese electric vehicle maker reported a larger adjusted net loss in the second quarter, but revenue beat expectations.

Coupa Software Inc. (COUP.O) jumped to double digits after the payment management software company beat second-quarter revenue and profit estimates.

Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Editing by Anil D’Silva, Maju Samuel, Shounak Dasgupta and Aurora Ellis

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