Wall Street’s Nasdaq Composite Index was headed for a record high for the third consecutive session on Thursday after a hawkish bias by the US central bank reduced the attractiveness of sectors whose fortunes are tied to economic growth.
The Nasdaq rose 0.9 percent at lunchtime in New York, as shares of electric car maker Tesla and tech-backed fitness group Peloton gained more than 5 percent. The broader S&P 500 rose 0.5 percent to also hit a new high.
Federal Reserve officials presented their forecast for the first year-long post-pandemic interest rate hike, leading to market turmoil last week. Trading has since subsided after Federal Reserve Chairman Jay Powell gave pessimistic assurances that significant hurdles remain to monetary tightening.
Investors too tweak their wallets Being less dependent on economically sensitive “value” stocks in industries like energy and banking that have dominated stock market growth since drug companies announced effective Covid-19 vaccines last November.
“It has set markets into an economic cycle that will be relatively shorter than previously expected,” said Bastian Drutt, strategist at CPR Asset Management, referring to the period between recovering from the pandemic shock and the next recession.
Technology stocks and other so-called growth companies, whose valuations are affected by estimates of future earnings, have also been affected by lower long-term government bond yields that determine how much investors will pay for companies’ cash flow. .
Fed officials’ expectations last week lowered five-year Treasuries and raised prices for 30-year bonds. The yield on the 30-year Treasury, which moves inversely with its price, fell from more than 2.2 percent last Wednesday to 2.09 percent.
“The amplitude of this particular move to stock growth has been very high,” said Roger Lee, strategist at Investec.
Elsewhere, the pound slipped from its highest level against the euro since early April after the Bank of England said its pandemic-era monetary policy “has remained appropriate”.
The Bank of England stated that the country “will see a temporary period of strong growth” and above-target inflation “after which growth and inflation will decline”.
The pound, which was trading at 1.17 euros before the Bank of England monetary policy meeting on Thursday, lost 0.4 percent against the single currency to 1.1664 euros. Against the dollar, sterling also fell 0.3 percent to $1.3912.
London’s FTSE 100 index, stacked with issuers taking advantage of the weak pound, closed 0.5 per cent higher.
The yield on UK 10-year government bonds, which moves inversely with its price, fell 0.04 percentage point to 0.74 per cent.
In Europe, the Stoxx Europe 600 Index rose 0.9 percent after the Ifo Institute’s business climate index rose to a higher-than-expected reading of 101.8 in June from 99.2 last month, highlighting optimism among business chiefs in Germany, the eurozone’s economic powerhouse. . Frankfurt Xetra Dax also ended the session 0.9 percent higher.
Brent crude, the global benchmark for oil, rose 0.2 percent to $75.33 a barrel.
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