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Wall Street extends gains as weak economic data grows Fed pivot bets

stock markets

Wall Street rallied for the second straight trading day, as the recent weak economic data helped to increase the probability for the US Federal Reserve to soften its hawkish tone.

US job openings sharply declined in August, following the weak ISM manufacturing PMI data on Monday. The bad news is good news now as it may promote the central bank to slow down rate hikes. The last two days' strong rebound in equities has also been triggered by dip-buys in oversold assets, after the intense sell-off throughout September.

Both the Bank of England's emergency bond-buying programme and the Reserve Bank of Australia’s less-than-expected 25 bps rate hike, suggest that central banks are probably now reaching their peak of hawkishness amid risks of an economic recession. 

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  • S&P 500 had its best two-day rally since 2020. Dow up 2.8%, S&P 500 advances 3.06%, and Nasdaq jumps 3.34%. All 11 sectors in the S&P 500 finished higher, with Energy and Financials leading gains. Mega-cap tech companies were all up between 1-3%. And major bank stocks all rose more than 4% ahead of the third quarter’s earnings reports one week later. 
  • Twitter's shares soared 22% on the news that Elon Musk offers to buy Twitter at the original price of $54.20 per share one day ahead of the court trial. Tesla’s stocks, however, pulled back from the session high, but are still up 3% after the sharp decline on Monday due to a miss on an estimate for the delivery number in Q3.
  • Credit Suisse’s shares jumped 12%, up for the second straight trading day after analysts reassured investors that the bank is in healthy capital and liquidity positions. However, will it be another Lehman Brothers story?
  • The RBA’s dovish rate hike of 25 bps boosted ASX, sending AUD down. The Reserve Bank of Australia surprisingly raised the cash rate less than expected by 50 basis points on Tuesday, which boosted optimism in the local equity markets and pressed on the Australian dollar.
  • The RBNZ is poised for a 50-bps rate hike forthe fifth time in a row, bringing the cash rate to 3.50%. Despite the RBA’s surprisingly downsized rate hike, it may be little chance for the Reserve Bank of New Zealand to follow suit. The rate announcement will be due at AEST 12 pm today.
  • Asian markets are set to open higher amid broad optimism. ASX futures were up 1.60%. Nikkei 225 futures rose 0.97% and FTSE China A50 futures advanced 1.43%. The NZX 50 jumped 0.65% at the open.  
  • OPEC+ considered doubling the output cut to 2 million barrels per day, pushing the WTI futures to surge for the second straight trading day, up 3%. The group is to meet at a virtual conference later today.
  • A softened US dollar and decline in bond yields supported gold to surge for the second consecutive trading day, up $33 per ounce, to $1,734.7, well above the previous key resistance of $1,700. Silver also continued to rise, breaking through the resistance of $20.70.
  • Bitcoin closes above 20,000 for the first time since 12 September, approaching the 50-day MA of 21,500.

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