Wall Street’s three main stock indexes rallied nearly 2% on Thursday on hopes that the U.S. Federal Reserve has reached the end of its interest rate hiking campaign and a batch of upbeat quarterly financial updates added to the bullish mood.
The Fed held interest rates steady on Wednesday as expected, and while Chair Jerome Powell left the door open to further tightening he also acknowledged the impact of a recent surge in bond yields on the economy.
The comments, viewed as hints that the central bank is done with its rate hikes, sent longer-dated U.S. Treasury yields tumbling, which supported stocks.
“Powell’s comments in the presser yesterday were what everyone wanted to hear,” said Justin Burgin, vice president of equity research at Ameriprise Financial in Troy, Michigan.
Burgin also pointed to better-than-expectated earnings reports. While the current-quarter guidance has been weaker than previously expected, Burgin said analysts are still forecasting growth.
“The fact the wheels didn’t come of the bus for the fourth quarter is pretty good,” he said.
According to the latest LSEG data, Wall Street is forecasting fourth-quarter earnings growth of 7.2%, down from 11% on Oct. 1, before the reporting season began. And for the third quarter, 80.9% of companies reporting so far have beat analysts’ expectations while 14.9% have missed expectations.