In a dramatic turnaround, Wall Street surged on Tuesday, buoyed by megacap growth stocks such as Tesla and Nvidia. The upswing came on the heels of a decline in monthly job openings, which has led investors to anticipate a pause in interest rate hikes by the U.S. Federal Reserve. The S&P 500 chalked up its most robust one-day gain since June 2, and the Nasdaq logged its strongest session since July 28, with both indexes closing at more than two-week highs.
The rally was sparked by the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) which showed job openings at 8.827 million in July, marking a drop for the third consecutive month. This decline signals easing labor market pressures. Adding to the optimistic outlook, the Conference Board reported a dip in consumer confidence in the United States, and interest rate futures signaled an 87% chance the Fed will keep rates steady at its September meeting. These developments have led investors to rekindle their interest in stocks, as they seem to believe that interest rate hikes may indeed have peaked.
Wall Street Soars on Pause in Interest Rate Hikes
Wall Street experienced a significant surge on Tuesday, led by growth in megacap stocks such as Tesla and Nvidia following declining monthly job openings reports that indicated a probable pause in the U.S. Federal Reserve’s interest rate hikes.
Record Gains and High Expectations
The S&P 500 recorded its most substantial one-day gain since June 2, and the Nasdaq had its strongest session since July 28, both closing at more than two-week highs. The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) reported job openings at 8.827 million in July, a continuous drop for the third month, hinting at a relaxation of labor market pressures. A report from the Conference Board revealed a dip in U.S. consumer confidence to 106.1 in August, against expected 116. These factors have led investors to expect a halt in the Fed’s interest rate hikes, with the CME Group’s FedWatch tool indicating an 87% probability of rates remaining steady in September and a 54% chance for November.
Growth Stocks on the Rise
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 a few sessions. This decline in yields aided growth stocks, with Nvidia climbing 4.2% to close at its highest ever. Tesla, despite a special order inquiry from a U.S. regulator regarding changes to its Autopilot software, rallied 7.7%. Both Nvidia and Tesla led in turnover on Wall Street, with over $33 billion traded in each stock. Alphabet also saw a 2.7% increase following the company’s unveiling of new artificial intelligence technology and partnerships.
Market Outlook
All 11 S&P 500 sector indexes saw an upturn, with communication services leading the pack with a 2.46% gain, closely followed by consumer discretionary at 2.35%. Investors are eagerly awaiting Friday’s July non-farm payrolls report for a clearer view of the labor market state. The Fed’s preferred inflation gauge, the personal consumption expenditures index, due on Thursday, will also be closely monitored.
Takeaways
The recent surge in Wall Street, influenced by a potential pause in interest rate hikes, highlights the impact of macroeconomic indicators on investor sentiment. The performance of growth stocks such as Nvidia and Tesla underscores the ongoing appeal of tech stocks, while the rise in all 11 S&P 500 sector indexes suggests a broad market optimism. However, forthcoming labor market data and inflation reports will provide more clarity on the economic outlook and could impact future market performance.
