Markets rallied on renewed hopes for a 25 basis point gain

Raphael Bostic, president and chief executive officer of the Federal Reserve Bank of Atlanta, at a conference in Dallas, Texas, U.S., on Thursday, May 24, 2018.

Cooper Neil | Bloomberg | Getty Images

This report comes from today’s CNBC Daily Open, our new newsletter for international markets. CNBC Daily Open brings investors up to speed with everything they need to know, wherever they are. Do you like what you see? You can subscribe here.

The markets overcame fears of higher interest rates to stage a last-minute rally.

  • A survey conducted by the US Chamber of Commerce in China found that its members do not rank China as a top three investment priority for the first time in 25 years. To boost sentiment, the Chinese government is urging potential investors and launching an ‘Invest in China Year’.
  • Headline inflation in the EU slowed to 8.5% in February, but that is more than the 8.2% economists had expected. It is likely that the European Central Bank will continue to raise interest rates aggressively.
  • PRO Shares of Chinese companies are either A-Shares, which are listed on Chinese stock exchanges and denominated in Chinese Yuan, or H-Shares, which are traded on the Hong Kong Stock Exchange in Hong Kong dollars. Analysts reveal their preference.

Markets processed mixed messages on Thursday and finally overcame fears of higher interest rates to stage a last-minute rally.

Early in the day, the US Labor Department reported that labor costs rose 3.2% in the fourth quarter, twice what analysts had estimated. Meanwhile, weekly jobless claims fell by 2,000 to 190,000, below expectations of 195,000. The data suggested a labor market that, somewhat amazingly, is still robust, which could prompt the Federal Reserve to raise rates when it meets later this month. Markets opened lower on the news.

Still, market fears were allayed hours later when Atlanta Federal Reserve President Raphael Bostic told the media that he favors lower – and slower – rate hikes. “Right now I’m still very firmly on the pace of the quarter point moves,” Bostic said, adding that “slow and steady” is his preferred course of action. His comments came after other Fed officials took a decidedly more aggressive tone in recent days, and what he said helped turn market sentiment around Thursday.

The S&P 500 was up 0.76%, the Nasdaq Composite was up 0.73% and the Dow shot up 1.05%, aided by an 11.5% increase in Salesforce. Despite the gains, the S&P 500 in particular appears to be on shaky ground, writes CNBC’s Patti Domm. The index hovers around its 200-day moving average, which is considered an indicator of the health of a stock or index. If the S&P drops below that level, fears in the market could lead to more sales. For now, however, all major indices are on track for a winning week.

Subscribe here to have this report sent straight to your inbox each morning before markets open.


Leave a Reply

Your email address will not be published. Required fields are marked *