Overnight themes:
US stocks experienced a rebound as investors returned after three days of intense selling, which had pushed the Nasdaq into correction territory and significantly lowered other key stock indices. The recovery occurred as central bankers dismissed the notion that the US economy was on the brink of recession.
The S&P 500 rose by 1.04%, with gains across all 11 sectors. The Dow Jones increased by 0.76%, while the Nasdaq grew by 1.03%. However, a decline in the final hour slightly dimmed the rally's luster.
The uplift in stocks followed a robust recovery in Japanese shares and after Federal Reserve officials downplayed concerns of a recession.
Japan's Nikkei 225 index surged 10.23% yesterday, offsetting much of the distressing 12.4% drop experienced on Monday. That decline marked the index's steepest since 1987, triggered by a rate hike last week that led to the unraveling of the yen carry trade.
San Francisco Fed President Mary Daly commented that the latest employment report indicated a slowdown in the economy, but not a drastic downturn. She mentioned that the Fed is willing to adjust interest rates in upcoming meetings. Chicago Fed President Austan Goolsbee stated that the Fed would respond to any slowdown in growth, asserting, "If the conditions collectively start showing deterioration, we're going to address it."
The likelihood of a 50 basis point rate reduction next month has increased to 75%, as per the CME's FedWatch tool.
Tech giants Nvidia and Meta Platforms were significant contributors to the market's recovery, with each company's stock rising nearly 4%.
"The market had become overvalued, but it has now adjusted significantly, especially the Nasdaq, leading investors to believe that lower interest rates should underpin stock prices," said Rick Meckler, a partner at Cherry Lane Investments, according to Reuters.
Sector gains varied, with energy up by 0.4% and real estate by 2.3%. Financials advanced by 1.46%, industrials by 1.22%, and technology by 1.11%.
RBA Governor Michele Bullock addressed a press conference late yesterday to counter market expectations that interest rates will fall.
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