The S&P 500 Index rose 0.91% on Wednesday, outpacing the Dow Jones Industrial Average, which gained 0.45%, and the Nasdaq 100 Index, which climbed 1.31%. The advance followed a 25 basis point interest rate hike by the Federal Reserve earlier in the week, a move that markets interpreted as a sign of the central bank's resolve to control inflation. Simultaneously, West Texas Intermediate crude oil prices dropped by more than 2%, easing concerns about persistent supply disruptions in the Middle East and lowering inflation expectations.
The decline in energy costs helped pull the 10-year Treasury yield down by 6.4 basis points to 4.959%. Bond yields also responded to the Fed's rate hike, with investors viewing the action as a reinforcement of the central bank's independence. However, gains in Treasury securities were limited by a surge in stock market activity, which reduced demand for safe-haven assets. Additionally, strong labor market data offered a hawkish signal for future monetary policy.
US economic indicators presented a mixed picture for investors. Weekly initial unemployment claims fell by 10,000 to an eight-week low of 196,000, exceeding expectations of an increase to 207,000. This data point suggested a labor market stronger than anticipated. In contrast, August housing starts unexpectedly declined by 2.6% month-over-month to 1.275 million, missing forecasts of a rise to 1.320 million. Building permits also dropped by 2.7% month-over-month to 1.394 million, lower than the expected 1.408 million.
The September Philadelphia Fed business outlook survey registered at 37.8, a decrease of 9.6 points but stronger than the consensus estimate of 32.1. The divergence in economic data highlighted the complexity of the current macroeconomic environment, with strong labor and business sentiment contrasting against a softer housing sector.
In international markets, the Euro Stoxx 50 rose 1.08%, while Japan's Nikkei-225 Stock Average closed up 0.33%. China's Shanghai Composite Index finished down 0.41%. In Europe, the Bank of England kept its benchmark interest rate unchanged at 3.75% by a 6-3 vote. Governor Andrew Bailey noted that while the global energy shock has had a limited effect on UK prices and wages so far, prolonged volatility would likely necessitate further rate hikes.
Equity sector performance was driven by strength in chipmakers and artificial intelligence stocks. Marvell Technology led Nasdaq 100 gainers with a jump of more than 7%, followed by ARM Holdings Plc, which rose over 6%. Other semiconductor firms such as SanDisk, Intel, and Micron Technology also advanced by more than 5%. Among the Magnificent Seven tech stocks, Nvidia gained over 2%, while Amazon.com, Microsoft, and Tesla each rose by more than 1%. Meta Platforms and Apple were exceptions to the tech rally, falling 0.80% and 0.07% respectively.
Generac Holdings surged more than 22% to lead S&P 500 gainers after announcing an agreement to supply up to $8 billion worth of generators for Amazon.com's data centers. The deal included a warrant for Amazon to acquire a stake in Generac. Vicor Corp also climbed more than 15% following the grant of a non-exclusive Vertical Power Delivery license to a new original equipment manufacturer.
On the downside, Fluence Energy fell more than 16% after cutting its full-year revenue forecast to $2.4 billion from a previous range of $2.9 billion to $3.1 billion, a figure well below the consensus estimate of $3 billion. CoreWeave dropped over 4% after announcing an at-the-market offering program that allows it to issue up to 35 million shares of Class A common stock.