Following Federal Reserve Chair Jerome Powell’s testimony market volatility falls further and the S&P 500 settled with gains on Thursday. Powell stuck to the message delivered the day before to the House Financial Services Committee, stating that 2 further interest rate increases might be warranted if the economy performs as expected.
Market volatility
U.S. initial jobless claims came in at 264,000 for the week ending June 17, unchanged from a revised higher level of 264,000 the prior week and slightly above expectations of 260,000.
The Bank of England announced a 50 basis point rate increase which is more than expected to combat inflation.
Major sectors on the S&P 500 closed on a mixed note, with consumer discretionary and communication services stocks recording the biggest gains on Thursday. However, energy and real estate stocks closed lower during the session.
The NASDAQ 100 rose 1.18% to close at 15,042.32 on Thursday, amid gains in shares of Apple Inc. AAPL -0.17% and Amazon.com, Inc. AMZN -0.63%.
The S&P 500 and NASDAQ Composite indexes rallied on Thursday, breaking a 3 day streak of declines. Both indexes are still down for the week, however. The Dow Jones Industrial Average declined for a 4th trading session.
Testifying before the Senate Banking Committee on Thursday Federal Reserve Chair Jerome Powell stated that the central bank is committed to bringing inflation down but not as aggressively as it did last year. But increased rate by Bank of England did worry the investors’ about the global economy.
Owing to these concerns oil prices fell. West Texas Intermediate crude, the US benchmark, fell 4.3% to about $69 a barrel. Brent futures, the international benchmark, declined to about $74 a barrel.
Tech stocks rally helped in lifting the broader S&P 500 and tech heavy NASDAQ Composite. Tesla shares gained about 2%, Microsoft added 1.8% and Apple increased 1.7%.
Shares of Spirit AeroSystems, a Boeing supplier, slid 9.4% after it halted production at a Kansas facility. Workers had moved to strike starting June 24. Overstock.com shares surged 17.3% after the company won an auction for Bed Bath and Beyond’s intellectual property and digital assets.
The Dow fell about 5 points, or 0.01%. The S&P 500 gained 0.4%. The NASDAQ Composite added about 1%.
Is market correction coming?
U.S. stocks generated solid performance in the first half of 2023. The S&P 500 remains below highs hit prior to 2022’s bear market downturn. Much of the market’s recent uptrend is driven by a narrow band of technology stocks.
“Investors are looking for signs that the market is on course for a full recovery,” says Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management. “Yet the reality is that we’re dealing with a muddled economy and a muddled market environment.”
Stock markets continue to exhibit volatility. However, the S&P 500 showed more consistency lately, generating gains in almost the first half of 2023. How will these and other factors determine the direction of the stock market in the second half of 2023?
Key factors to watch
Is there a possibility of market correction or is it going to increase further could be determined by the following factors in the coming months.
- Inflation trends and future Fed policy moves.
- Consumer spending.
- Corporate earnings.
The outcome of these three variables will likely play the biggest role in determining the stock market’s performance in 2023.
Other considerations for investors
While they may not represent decisive factors, policy issues and geopolitical matters could affect investor sentiment and be reflected in positive or negative movements in the markets.
Clear perspective
Market volatility and periods of market uncertainty are not unusual. Market volatility can be expected to persist given the range of issues that contribute to the market’s near-term uncertainty.
Eric Freedman, chief investment officer at U.S. Bank Wealth Management says, “It’s important to maintain an appropriate perspective about the markets”. He encourages investors to view markets with a long term lens. “Timing the markets and trying to be precise on when to be in and when to be out is challenging. “Markets will do things at the exact opposite time you expect them to”, he said.
