U.S. Stocks Show Remarkable Turnaround After Early Sell Off

Banking, semiconductor, computer hardware and telecom stocks showed strong moves to the upside whilst in Malaysia, the FTSE Bursa Malaysia Kuala Lumpur Composite Index was down 7.21 points or 0.52 per cent to 1,373.36, from Wednesday’s close at 1,380.57 while some banking, oil & gas closed lower with gains shown in rubber glove and services sectors on Thursday.

Following an early sell-off, stocks showed a substantial turnaround over the course of the trading session on Thursday. The major averages climbed well off their lows of the session and firmly into positive territory.

The major averages finished the session not far off their best levels of the day. After plunging by nearly 550 points in early trading, the Dow spiked 827.87 points or 2.8 percent to 30,038.72.

U.S. stocks surged to close more than 2% higher on Thursday, as technical support and investors covering short bets drove a dramatic rebound from a selloff earlier in the day.

The reversal marked a jump of nearly 194 points in the S&P 500 from its low of the session to its high, the biggest intraday jump for the index since Jan. 24.

The Nasdaq also surged 232.05 points or 2.2 percent to 10,649.15, while the S&P 500 jumped 92.88 points or 2.6 percent to 3,669.91.

The turnaround on Wall Street came as some traders looked to pick up stocks at reduced levels following the early weakness, which dragged the major averages down to their lowest intraday levels since 2020, RTT News reported.

Traders may also have felt concerns about inflation and higher interest rates have already been priced into the markets following the recent downward trend.

The early sell-off on Wall Street came following the release of the Labour Department’s highly anticipated report on consumer price inflation in the month of September.

The report showed consumer prices rose by more than expected in September, leading to a spike in treasury yields and ongoing concerns about the outlook for interest rates.

The Labour Department said its consumer price index rose by 0.4 percent in September after inching up by 0.1 percent in August. Economists had expected consumer prices to edge up by 0.2 percent.

Excluding food and energy prices, core consumer prices climbed by 0.6 percent for the second month compared to expectations for a 0.5 percent advance.

The report also showed the annual rate of growth by consumer prices slowed to 8.2 percent in September from 8.3 percent in August, although the annual rate of growth by core prices accelerated to a 40-year high of 6.6 percent from 6.3 percent.

“The disappointingly broad-based and high inflation readings will keep the Fed in an aggressive tightening mode and on course for at least another 125bps this year,” said Kathy Bostjancic, Chief U.S. Financial Economist at Oxford Economics.

Sector News

Banking stocks helped lead the rebound on Wall Street, resulting in a 5.2 percent spike by the KBW Bank Index. The index rallied after hitting its lowest intraday level in almost two years in early trading.

A sharp increase by the price of crude oil also contributed to significant strength among energy stocks, with crude for November delivery jumping $1.84 to $89.11 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 4.5 percent and the NYSE Arca Oil Index shot up by 3.8 percent.

Considerable strength also emerged among chemical stocks, as reflected by the 3.4 percent surge by the S&P Chemical Sector Index. The index also bounced off a nearly two-year intraday low.

Semiconductor, computer hardware and telecom stocks also showed strong moves to the upside, while notable weakness remained visible among gold stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index slid by 0.6 percent, while Hong Kong’s Hang Seng Index tumbled by 1.9 percent.

Meanwhile, the major European markets moved to the upside over the course of the session. While the German DAX Index surged by 1.5 percent, the French CAC 40 Index jumped by 1.0 percent and the U.K.’s FTSE 100 Index rose by 0.4 percent.

In the bond market, treasuries climbed well off their lows of the session but still closed in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5 basis points to 3.952 percent after reaching high of 4.080 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to the latest U.S. economic data, including reports on retail sales, import and export prices and consumer sentiment.

Earnings news is also likely to attract attention, with financial giants Citigroup (C), JPMorgan Chase (JPM), Morgan Stanley (MS) and Wells Fargo (WFC) among the companies due to report their quarterly results before the start of trading.

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