September 25 2022 2:31 PM E-paper Subscribe Sign in My Account Sign out

Wall Street stocks rally again, shrugging off weak GDP report

wall-street-wall-st-sign-and-broadway-street-ove-2021-08-31-08-53-08-utc
(File photo: Jordan News)
NEW YORK, United States — Wall Street stocks rose on Thursday despite data showing the US economy contracted for a second straight quarter. Investors took it as a signal that the Federal Reserve may slow interest rate hikes.اضافة اعلان

Stocks initially fell after the economic report, which showed US gross domestic product declined at an annual rate of 0.9 percent in the second quarter, following an even bigger drop in the year's first three months.

But markets pivoted later in the morning, betting that clear signs of economic weakness would prompt the Fed to ease off on steep increases in borrowing costs. Instead, the US central bank on Wednesday undertook its second straight 75 basis point increase. It signaled it is prepared to do more.

"The real catalyst ... is a belief that bad news (earnings disappointments and weak data) is good news (fewer rate hikes from the Fed)," Briefing.com said in an analysis.

Major US indices finished the session up around one percent, following even bigger gains Wednesday after investors welcomed comments by US Federal Reserve chief Jerome Powell, who said the central bank at some point would be able to slow the pace of rate hikes.

"Well, GDP was quite poor, so there won't be a hat-trick of 75 basis point hikes in September, that's for sure," said Fawad Razaqzada at City Index and FOREX.com.

"The US GDP data has re-affirmed my view that the Fed will have to slow down the pace of the hikes and potentially go in reverse in early 2023," he added.

Analysts also pointed to improved investor sentiment that has enabled stocks to advance despite lackluster earnings because the results have not been as bad as feared.

Also, many investors believe that "any downturn that we are going through will likely be mild," said Jack Ablin, a chief investment officer of Cresset Asset Management.

But Ablin said it was still too soon to "declare victory" on inflation.

Earlier, European stock markets finished mostly higher.

Europe's energy sector was particularly focused on Britain's Shell and France's TotalEnergies posting bumper second-quarter profits on elevated oil and gas prices. 

Asian indices mostly climbed following Wednesday's surge on Wall Street.


Read more Business
Jordan News