Here Is What Is Causing Wall Street Gains
As investors processed hawkish comments from officials that solidified predictions of a significant interest rate rise later this month, Wall Street’s main indexes notched gains on Thursday, led mostly by financial institutions and healthcare businesses.
Indexes fluctuated back and forth in choppy trading as worries about the Federal Reserve’s upcoming actions to rein in soaring inflation persisted. There’s certainly a lot of uncertainty, says Grace Lee, senior portfolio manager for equity income at Boston-based Columbia Threadneedle Investments. As soon as there is a little more clarity or light at the end of the tunnel, people will make decisions for longer than five minutes or five seconds. The likelihood that the Fed will raise interest rates by 75 basis points this month is 87%, according to money market traders.
What Rate to Expect?
According to Bank of America (NYSE: BAC), Barclays (LON: BARC), and Jefferies, an interest rate increase of 75 basis points is currently anticipated. Before, Bank of America and Jefferies predicted a 50-basis point hike, while Barclays suggested it might be as high as 75 basis points. Jerome Powell, chair of the Federal Reserve, stated that the institution is “deeply committed” to bringing down inflation and that it must continue working until it succeeds. Charles Evans, president of the Chicago Fed, agreed with his fellow officials that taming inflation is “task one.”
The U.S. is also anticipated by investors. Next week’s August inflation data will provide new information on whether the Federal Reserve will raise rates by half a percentage point or three-quarters of a percentage point at its upcoming policy meeting on September 20-21.
Equity markets froze on Thursday as the European Central Bank increased interest rates by an unprecedented 75 basis points and hinted at more increases, due to concerns over rapid monetary tightening throughout the world. The number of Americans submitting new jobless benefit claims decreased last week to a three-month low, according to statistics, highlighting the strength of the labor market even as the Fed hikes interest rates.
