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Wall Street bounces off a session low despite high rates, strong economic data

Wall Street

US stocks finished mixed as tech shares led Nasdaq and S&P 500 to gain, while Dow extended losses for the second straight trading day. Although rates stayed at high levels following Fed Powell’s comments on “higher for longer” rates, broad markets bounced session lows, particularly the growth stocks. The VIX fell slightly to under 20, suggesting that risk sentiment is still resilient. Investors are digesting Fed’s hawkish guidance and awaiting crucial job data that is due for release on Friday. The ADP data shows that the US added more jobs in February than it did in January, though the wage growth slightly slowed down. A positive sign is that job openings declined in January but still more than available workers, indicating that the labour market is mostly likely to stay tight.

Asian markets are set to open higher as investors tried to recover from the sharp one-day selloff. The ASX futures rose 0.44%. The Hang Seng Index futures were up 0.19% and Nikkei 225 advanced 0.60%.

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  • 6 out of 11 sectors in the S&P 500 finished higher, with real estate and technology stocks leading gains, up 1.32% and 0.84% respectively. Energy stocks extended losses following a second-day drop in oil prices, down 1.02%. But Occidental Petroleum’s shares rose 2% after a new regulatory filing showed that Berkshire Hathaway bought nearly 5.8% million shares of the oil company recently, leading its ownership to 22.2%.
  • Tesla’s shares dropped 3% due to an investigation into complaints about steering wheels coming off its Model Y vehicles while the vehicle was in motion. The EV maker’s shares fell for the third straight trading day on Wednesday. Tesla’s Investor Day was somewhat of a disappointing event from last week, which may have caused the recent selloff.
  • Bank of Canada kept the interest rate at 4.5% after 8 consecutive rate hikes, which was widely expected. But the bank said it would “continue to assess economic developments and is prepared to increase the rate further if needed to return to the 2% inflation target”. The BOC is the first western central bank has paused its rate hike cycle in more than one year as inflation cooled and economic data deteriorated.
  • Crude oil extended losses following Fed’s hawkish guidance on rate hikes, though the US crude inventory showed a draw of 1.7 million after a 10-week build as refineries recovered some of the operations. The bearish factor will be uncertainties around China’s economic recovery. 

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