Tech leads gains as sentiment improves
US stock indices rallied, with the Nasdaq’s 1.9 per cent advance boosted by gains in semiconductor shares as inflation concerns eased after the US and Iran signed a peace agreement.
Investors, however, continued to price in interest rate hikes this year from the Federal Reserve.
The Philadelphia semiconductor index sharply outperformed the broader market, rising 6.4 per cent as Intel shares jumped 10.6 per cent to a record high.
US President Donald Trump said Apple had agreed to work with Intel to design and manufacture its chips in the US.
Oil falls as Iran tensions ease
Oil prices slid early in the session to their lowest levels since early March after the US and Iran signed an interim agreement extending the April ceasefire by 60 days.
Inflation has been a key concern for investors, with oil prices having surged since the conflict began in late February.
Although Trump warned attacks could resume if Iran failed to honour its commitments, ships began sailing again through the Strait of Hormuz, where shipments of oil, gas and other goods had been disrupted.
Fed outlook still in focus
On Wednesday, all three of Wall Street’s major indices had fallen as investors priced in the likelihood of further rate hikes after Federal Reserve chair Kevin Warsh underscored the need to curb inflation.
“Markets got spooked by Warsh yesterday essentially promising to contain inflation,” said Tony Welch, chief investment officer at SignatureFD.
“All together, the package of data is still supportive whether or not the Fed has become a little bit more hawkish.”
Traders are pricing in around a 50 per cent chance of a 25 basis point rate hike by September, and about a 20 per cent probability of a larger 50 basis point increase, according to CME Group’s FedWatch tool.
Eric Johnston, chief equity and macro strategist at Cantor, said: “The conclusion today is that the Fed has more credibility around inflation.”
Broad gains across sectors
Five of the 11 major S&P 500 sectors closed higher.
Technology led gains with a 2.7 per cent rise, followed by consumer discretionary, up 1.8 per cent.
Consumer stocks were supported by travel-related companies, with lower fuel prices lifting cruise-line operators and airline shares.
The Dow Jones Transport average rose 0.5 per cent, while the small-cap Russell 2000 index gained 2.0 per cent to a record closing high.
Mixed corporate results weigh on some stocks
US labour data showed jobless claims fell last week, pointing to continued strength in the labour market.
However, the S&P 500 software and services sector fell 0.7 per cent after hitting its lowest level in more than two months.
Accenture shares dropped 18 per cent after the company trimmed the top end of its annual revenue forecast, dragging down peers including Cognizant, Gartner and IBM, which fell between 4.5 per cent and 10.5 per cent.
Kroger shares fell 8.4 per cent after reporting weaker-than-expected quarterly profit.
Shares in Elon Musk’s SpaceX declined 3.6 per cent, extending losses after a strong debut earlier in the week.
Heavy trading as derivatives expire
Thursday also marked the quarterly expiry of derivatives contracts tied to stocks, index options and futures — known as “triple witching” — which can increase trading volumes and volatility.
Trading volumes were elevated, with 33.59 billion shares changing hands compared with an average of 21.83 billion over the past 20 sessions.
Advancing stocks outnumbered decliners by 1.72-to-1 on the NYSE and 1.77-to-1 on the Nasdaq.
The S&P 500 recorded 29 new 52-week highs and 27 new lows, while the Nasdaq Composite posted 123 new highs and 152 new lows.
