Market Recap:
On Wednesday, U.S. stocks rebounded from early losses to close higher, driven by strong gains in technology and chip stocks. The Nasdaq 100 Index (^IUXX) led the way with a 2.17% increase, reaching a one-week high. The S&P 500 Index (^GSPC) climbed by 1.07%, while the Dow Jones Industrial Average (^DJI) added 0.31%.
Key Drivers:
Chip Stock Surge:
Technology stocks, particularly those in the semiconductor sector, fueled the market’s rebound. ARM Holdings Plc (ARM) led the charge with a 9% gain, while Nvidia (NVDA) surged over 8%. Other major chipmakers such as Broadcom (AVGO), ASML Holding NV (ASML), and several others also posted strong gains.
Inflation Data Impact:
The August Consumer Price Index (CPI) report showed headline inflation easing to 2.5% year-over-year, matching expectations and the smallest increase in 3.5 years. However, core CPI, which excludes food and energy, remained at 3.2% year-over-year, slightly above expectations.
The data initially weighed on stocks as it suggested persistent inflationary pressures. This shifted expectations for the Federal Reserve’s interest rate cut at next week’s FOMC meeting, reducing the likelihood of a 50 basis-point cut from 50% to 14%. Markets now anticipate a 25 basis-point cut with near certainty.
Mortgage Market:
The Mortgage Bankers Association reported a 1.4% rise in mortgage applications for the week ending September 6. The average 30-year fixed mortgage rate fell to 6.29%, the lowest in 19 months.
Overseas Markets:
European stocks were mixed, with the Euro Stoxx 50 closing up 0.35%. In contrast, China’s Shanghai Composite fell 0.82% to a seven-month low, and Japan’s Nikkei 225 declined 1.49%.
Interest Rates and Bonds:
December 10-year T-notes (ZNZ24) closed down 4 ticks, with the 10-year T-note yield rising slightly to 3.653%. The increase in yields came as a result of the core CPI data, which dampened expectations for a more aggressive rate cut.
European government bond yields fell, with the 10-year German bund yield decreasing to 2.112% and the 10-year UK gilt falling to 3.761%.
Stock Movers:
Gainers:
Albemarle (ALB): Shares jumped over 13% as lithium stocks rallied following news of reduced lithium production by CATL.
Starbucks (SBUX): Up more than 5% after CEO Niccol hinted at potential new ventures in China.
AES Corp (AES): Rose more than 8% following a positive initiation from Jeffries.
Viking Therapeutics (VKTX): Increased over 11% after JPMorgan Chase initiated coverage with an overweight rating.
William-Sonoma (WSM): Up more than 2% following an upgrade from Jeffries.
Decliners:
Trump Media & Technology (DJT): Fell more than 10% after the presidential debate heightened market concerns.
GameStop (GME): Declined over 12% due to a weaker-than-expected Q2 revenue report and plans to issue new shares.
Rollins Inc (ROL): Dropped more than 2% due to negative sentiment following a similar decline in peer Rentokil.
Outlook:
The market’s recovery was bolstered by strong performances in technology and chip stocks, though inflation data continues to shape Fed policy expectations. The focus will remain on upcoming economic data and Federal Reserve meetings, as well as the impact of geopolitical developments and company earnings reports.
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