Wall Street showed resilience Thursday as major indexes rebounded after Wednesday’s sharp sell-off. The S&P 500 rose 0.7% in midday trading, recovering some losses from the prior day’s 2.9% drop. The Dow Jones Industrial Average climbed 255 points, or 0.6%, while the Nasdaq composite gained 0.9%.
Federal Reserve’s Impact on Wall Street’s Movements
The recent volatility stems from the Federal Reserve’s updated guidance, signaling fewer interest rate cuts in 2025 than previously anticipated. Traders now expect only one or two rate cuts next year, according to CME Group data, with some doubting any cuts at all. This contrasts sharply with expectations just a month ago when at least two cuts were considered likely.
Lower interest rates are typically welcomed by Wall Street for boosting economic activity and elevating investment valuations. However, they also risk fueling inflation, adding complexity to market sentiment.
Corporate Earnings Drive Gains and Losses on Wall Street
Darden Restaurants (NYSE:DRI), the parent company of Olive Garden, saw its stock leap 14.5% after reporting quarterly profits that exceeded analysts’ expectations. The company also projected robust revenue growth for the fiscal year, contributing to its rally.
Accenture (NYSE:ACN) shares rose 6.7% following its report of better-than-expected earnings and an optimistic revenue outlook. CEO Julie Sweet highlighted global growth as a key driver of the strong performance.
Amazon (NASDAQ:AMZN) gained 2.2%, despite labor strikes at seven facilities during the retail giant’s busiest season. The company downplayed the impact on its operations, even as unions called the strike the largest in Amazon’s history.
On the downside, Micron Technology (NASDAQ:MU) plunged 15.6%. Although the chipmaker’s profit exceeded forecasts, its revenue fell short, and its outlook for the next quarter disappointed investors. CEO Sanjay Mehrotra attributed the shortfall to subdued consumer demand.
Meanwhile, Lamb Weston (NYSE:LW) suffered a 21.6% drop after missing earnings expectations and lowering its financial guidance for the fiscal year. The company cited weakening demand for frozen potatoes outside North America and announced a leadership change.
Bond Market Reaction
In the bond market, yields showed mixed movements. The 10-year Treasury yield edged up to 4.55% from 4.52%, reflecting shifting expectations around the Federal Reserve’s rate decisions. Longer-term yields continue to pressure the housing market by sustaining high mortgage rates.
Conversely, the two-year yield, closely tied to Fed rate forecasts, eased slightly to 4.29% from 4.35%. These fluctuations underscore ongoing uncertainty about the central bank’s monetary policy trajectory.
Mixed Signals in U.S. Economic Data
Recent economic reports painted a complex picture. The U.S. economy grew at an annualized 3.1% rate during the summer, surpassing initial estimates. Meanwhile, fewer Americans applied for unemployment benefits last week, signaling a resilient job market. However, manufacturing in the mid-Atlantic region contracted unexpectedly, raising concerns about industrial sector health.
Housing Market Challenges Persist
Homebuilder Lennar (NYSE:LEN) dropped 5.6% after reporting lower-than-expected profit and revenue. CEO Stuart Miller cited affordability challenges from elevated mortgage rates as a significant headwind, despite strong demand and limited supply. However, a separate report offered a glimmer of hope, revealing an increase in sales of previously owned homes.
Global Market Trends
International markets also experienced turbulence. London’s FTSE 100 fell 1.2% as the Bank of England opted to maintain its main interest rate amid persistently high inflation and stagnant economic growth. In Asia, Japan’s Nikkei 225 dropped 0.7% after the Bank of Japan held its benchmark interest rate steady, reflecting broader regional declines.
Outlook
As Wall Street navigates shifting interest rate expectations and mixed corporate earnings, market sentiment remains fragile. Investors will closely watch upcoming economic data and Federal Reserve communications for further clarity.
This Wall Street’s update underscores the intricate interplay between central bank policies, corporate performance, and broader economic trends, which collectively shape investment landscapes.
Featured Image – Depositphotos
