Stocks Recoup Post-Fed Losses As Traders Challenge Powell, Regional Banks Crack, Gold Rises: What's Driving Markets Thursday?

The day after the Federal Reserve meeting is marked by a rebound on Wall Street, with all major stock indices in the green, buoyed by strong corporate earnings and the market’s continued dovish expectations regarding the Federal Reserve’s interest rate cuts.

Speculators seem poised to challenge Fed Chair Jerome Powell, who stated that a cut in March is unlikely and that more confidence is needed to assert that inflation is heading toward the Fed’s 2% target.

The odds for the March meeting, according to fed futures prices, assign a 41% chance for a cut and a 59% chance for no change. Yet speculators are increasing their bets from May onward, factoring in six rate cuts on a meeting-by-meeting basis until December 2024.

On the data front, initial jobless claims increased for the second consecutive week, reaching their highest level in two months as labor costs decelerated and the number of job cuts surged. Survey data on manufacturing activity showed better-than-expected conditions in January.

Here is how major markets traded during the day:

• Both the S&P 500 and the tech-heavy Nasdaq 100 show gains of 0.8%, while blue chips and small caps are slightly softer, at 0.6%.
  
• Cracks are re-emerging in the regional banking sector following the nightmarish results published Wednesday by New York Community Bancorp NYCB, which is plunging another 13% after closing down 37% the day before. Analysts are beginning to scrutinize individual banks’ exposure to troubled real estate loans, particularly commercial properties and offices.
  
• The sector’s gauge, the SPDR S&P Regional Banking ETF KRE, is falling more than 4%, on track for the worst performing two-day streak since March 2023.
  
• Treasury yields are down across all major maturities, with the 10-year yield dropping 7 basis points to 3.85%, after having risen to a more than 4% yield the previous day. The iShares 20+ Year Treasury Bond ETF TLT is up 1.6%.
  
• The market’s dovish view on interest rates and banking uncertainties have revived interest in gold, with the yellow metal rallying 1.2%, its strongest day since mid-December 2023, and putting it on track for the fourth straight positive session.

Thursday's Performance In Major Indices, ETFs

The SPDR S&P 500 ETF Trust SPY was 0.9% higher to $487.46, the SPDR Dow Jones Industrial Average DIA rose 0.7% to $384.24 and the tech-heavy Invesco QQQ Trust QQQ rose 0.9% to $420.71, according to Benzinga Pro data.

Sector-wise, the Consumer Staples SPDR Select Sector Fund XLP outperformed, up 1.7%, followed by the Materials SPDR Select Sector Fund XLB, up 1.5%.

Notable laggards were the Energy SPDR Select Sector Fund XLB, down 0.6%, and the Financials SPDR Select Sector Fund XLB flat for the day.

On the industry front, gold miners rallied, with the VanEck Gold Miners ETF GDX gaining 3.3%. On the flip side, the SPDR S&P Regional Banking ETF fell 2.5%, trimming heavier losses during the session.

Thursday’s Stock Movers

• Qualcomm Inc. QCOM fell over 4%, despite reporting better-than-expected results last quarter. The negative performance is due to investors’ worries about the company’s sales in China in the first quarter of 2024.
• Other companies reacting to earnings are MetLife Inc. MET, down 6%, Corteva Inc. CTVA, up over 18%, Merck & Company Inc. MRK, up 3.8%, Honeywell International Inc. ONC, down 3%, Peloton Interactive Inc. PTON and UGI Corp. UGI, up 11.4%.

Read now: Goldman Sachs Pushes Back Fed Rate Cut Timeline After Powell’s ‘Strong Signal’

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