By
Steve Muchoki
April 16th, 2024
US stocks continued to gain on Thursday as the Fed decided not to play around with the stimulus for now. Also, fears of the bankruptcy of China’s Evergrande Group have subsided for a while.
On Thursday, September 23, the Dow Jones Industrial Average (INDEXDJX: .DJI) rallied for the second consecutive day. After Wednesday’s gain of 300 points, Dow added another 500 points on Thursday gaining 1.5%.
This also helped the index to reclaim its early week losses. The Thursday’s market rally came amid subsiding fears of the crisis looming in china’s real estate market. furthermore, the Federal Reserve has also kept its monetary stimulus in place for a little longer.
Similar to Dow Jones, the S&P 500 (INDEXSP: .INX) also gained 1.21% closing at 4,448 levels. Also, the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) closed 1% higher at 15,052 levels.
As said, Thursday’s rally helped all of these three indices to recover early week losses. Earlier on Monday, the concerns of bankruptcy for China’s Evergrande Group sent shock waves across the global market. China’s one of the biggest real-estate groups has been under a mounting debt of more than $2 trillion.
However, China’s central bank PBoC ultimately came to the rescue by creating a $16 billion bailout plan and infusing more money into the system. Furthermore, the US market got an additional boost from Fed’s announcement on Wednesday.
However, the central bank has said that it soon plans to taper its bond purchase program starting November 2021. Speaking to CNBC, Charlie Ripley, senior investment strategist for Allianz Investment Management said:
“Uncertainty had been building around the path of the economy and the Fed instilled some confidence into markets yesterday. In addition, other risks that have been weighing on investor sentiment like the debt ceiling and risks associated to China’s real estate market appear to be fading, which have dialed up investors’ appetite for risk.”
Sectors That Performed on Thursday
On Thursday, stocks linked to the global economic recovery did well! Las Vegas Sands having big China exposure gained by 3.2%. Similarly, shares of General Electric (NYSE: GE) gained about 4.5%.
Energy stocks also did well as the WTI crude futures surged to $73.50 per barrel. This was also the highest level attained after August 2. As a result, the shares of APA Corp and Devon Energy gained 7% each.
On Thursday, cloud software giant Salesforce.com, Inc (NYSE: CRM) also updated its full-year 2022 revenue guidance. Salesforce gained 7.2% after that pushing the Dow Jones higher.
With the bounceback of the 10-year Treasury Yield, bank stocks also made strong gains. Giants like Citigroup Inc (NYSE: C), Bank of America Corp (NYSE: BAC), and JPMorgan Chase & Co (NYSE: JPM) gained 3% each.
The concerns with the Evergrande Group are yet over completely. A US dollar-denominated bond was due on Thursday, with Evergrande having to pay $83 million in interest. As per people familiar with the matter, government regulators have instructed the real-estate giant to avoid any near-term dollar bond default.
While a crisis-like situation looms around in the Chinese market, some analysts are positive of the US economic growth going further. Chris Zaccarelli, chief investment officer for Independent Advisor Alliance said:
“Although there may be some additional turbulence this fall, we are constructive on the US economy in general and believe that any dips would be worth buying as the fundamentals are still sound and recession appears to be more than a year away at this point”.