Wall St rebounds driven by banks and the health sector

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U.S. stock indices rallied on Thursday, driven mainly by financial institutions and healthcare companies, as investors digested aggressive comments from Federal Reserve Chairman Jerome Powell. which cemented bets on another big interest rate hike this month.

  • Indices swung back and forth in choppy trading as concerns persisted over the Federal Reserve’s next steps to rein in rising inflation.
  • “There’s a lot of uncertainty and I think people aren’t going to make up their minds for more than five minutes or five seconds, until there’s a little more clarity or light at the end of the tunnel,” said Grace Lee, equity portfolio manager at Boston-based Columbia Threadneedle Investments.
  • Money market traders see an 87% chance the Fed will raise rates by 75 basis points at this month’s meeting.
  • Bank of America (NYSE: BAC ), Barclays (LON: BARC ) and Jefferies said they now see a 75 basis point rate hike. Earlier, Barclays had said it could be a 50 or 75 basis point hike, at a time when Bank of America and Jefferies were betting on a 50 basis point hike.
  • As the odds of another rate hike increased, both the rate -sensitive S&P 500 banking index and the S&P 500 healthcare index rose 2.8% and 1.8%, respectively.
  • The health sector was buoyed by news that Regeneron Pharmaceutical Inc’s blindness treatment Eylea has been shown to work just as well when given at a higher dose and with a longer interval between injections. Shares of the pharmaceutical company rose by double digits.

*”People are embracing security. Healthcare is a very secure sector and it’s still quite cheap, as is the financial sector in general,” Lee said.

  • The Fed is “strongly committed” to controlling inflation, but hope remains that it can be achieved without the “very high social costs” involved in past inflation fights, Powell said in remarks at a conference in the Cat Institute.
  • For its part, the European Central Bank raised key interest rates by 75 basis points on Thursday and signaled further hikes. That follows big rate hikes from the Bank of Canada and the Reserve Bank of Australia earlier this week.
  • The Dow Jones Industrial Average rose 193.24 points, or 0.61%, to 31,774.52 points, while the S&P 500 gained 26.31 points, or 0.66%, to 4,006.18 points. The Nasdaq Composite added 70.23 points, or 0.6%, to 11,862.13.
  • Volume on US stocks was 10.19 billion shares, compared to the 10.37 billion average for the full session of the last 20 trading days.
  • Wall Street’s main indexes rose to a high in about a month on Wednesday as bond yields retreated after a recent rise fueled by expectations of higher interest rates. Still, the benchmark S&P 500 has lost more than 16% so far this year.
  • Data showed the number of Americans filing new claims for jobless benefits fell to a three-month low last week, underscoring the strength of the labor market despite the Fed raising interest rates.
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