Rise in equities, on track for quarterly gains despite recent selloff
US stocks rose on Thursday, indicating that the broader stock market would see gains for the third quarter despite recent backlash trading.
The S&P 500 rose 0.4%, on track to cement a sixth straight quarter of gains. The Dow Jones Industrial Average also gained 0.4% and the tech-rich Nasdaq Composite climbed 0.5%.
Investors have had to deal with a slight increase in cases of the Delta Covid-19 variant this quarter, alongside concerns that higher inflation – driven by soaring energy prices – will stick around longer than expected. Fears of contagion from debt-laden property developer China Evergrande Group also weighed on the markets.
Stocks have had a particularly tough time since the Federal Reserve signaled last week that it would start cutting bond purchases as early as November and possibly start raising interest rates next year.
“We have entered a slightly more difficult and more volatile recovery phase, and there are a number of headwinds against the upward march that we have experienced since last year,” said Sebastian Mackay, manager of multi-asset funds at Invesco.
The anticipation of rising interest rates and higher inflation, also reflected in rising oil and commodity prices, has led some investors to sell government bonds, whose yields have fallen. been close to historically low levels. The sell-off cooled on Thursday, with the benchmark 10-year Treasury bond yield falling to 1.538% from 1.540% on Wednesday. Yields and prices move in the opposite direction.
“People are realizing that the only asset with real expected returns are stocks. The market somehow seems to be progressing in this environment where there is no alternative, ”said Edward Park, chief investment officer of UK investment firm Brooks Macdonald. “It will not last if central banks make it clear that they are raising rates regardless of the growth environment.”
Investors have also sold stocks of large tech companies, which tend to do better in low-yielding environments as investors have more incentives to buy stocks and expect higher profits going forward.
Shares of Virgin Galactic Holdings gained 9.3% after the main US aviation safety regulator said it cleared the company to operate space flights again. Shares of Bed Bath & Beyond fell 28.7% after the retailer lowered its forecast for the year as it reported slower traffic to its stores due to the Delta variant and chain challenges supply.
Meanwhile, data released Thursday showed the number of Americans who first claimed unemployment benefits in the week ended September 25 rose to 362,000, from 351,000 the week before.
Futures contracts on Brent crude, the benchmark in international energy markets, fell 1.2% to $ 77.14 per barrel.
Overseas, the pan-continental Stoxx Europe 600 rose 0.3%, driven up by basic resources, while travel and leisure companies fell sharply. Shares of Swedish cloud computing company Sinch AB rose 4.8% after announcing it had acquired the Pathwire email delivery platform.
European natural gas prices have jumped again amid concerns that the continent does not have adequate reserves as winter approaches, when demand picks up. Gas futures for delivery in the Netherlands – the regional benchmark – rose 5.2% to 91.74 euros, which is equivalent to around $ 106.40, a megawatt hour. Prices have more than sevenfold in the past year.
Indices in Asia closed after a mixed performance on Thursday. China’s Shanghai Composite added 0.9% and South Korea’s Kospi edged up 0.3%. Hong Kong’s Hang Seng lost 0.4%. Concerns over Chinese growth and the resilience of its real estate sector also weighed on global sentiment this quarter.
Write to Caitlin Ostroff at [email protected]
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