Nasdaq is hoping for a less aggressive rate hike after weak PMI data

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., Aug. 22, 2022. REUTERS/Brendan McDermid

Aug 23 (Reuters) – The tech-heavy Nasdaq rose to record highs in brisk trading on Tuesday, buoyed by megacap growth stocks.

Private sector business activity in the United States contracted for a second straight month in August, particularly as softness in the services sector weakened demand in the face of inflation and financial conditions. Read more

The S&P Global flash composite purchasing managers index (PMI) for August fell to 45 this month, the lowest since February 2021, from the last reading of 47.7 in July. A reading below 50 indicates a contraction in motion.

“Weak economic news has led to a slight rebound in the stock market, particularly in Nasdaq stocks,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.

“Investors, especially algorithms, are led to believe that the Fed will not be as aggressive on interest rates, and therefore they can recover a bit rather than sell off the pressure that we saw this morning.”

U.S. Treasury yields slipped from multi-week highs, with the benchmark 10-year yield slipping below 3% after PMI numbers, supporting some megacap growth stocks.

High-growth stocks such as Nvidia Corp ( NVDA.O ) and Tesla Inc ( TSLA.O ) each rose more than 1%, while semiconductor stocks ( .SOX ) gained 1.4% in midday trading.

Trimming some gains, Zoom Video Communications Inc (ZM.O) fell 14.8% after the company cut annual profit and revenue forecasts. Read more

After a rough start to the year, markets have rallied since mid-June on hopes that inflation has picked up, but the summer rally was sparked last week by renewed fears over the Fed’s aggressive monetary policy tightening.

Wall Street closed at its lowest level in the past two sessions, as investors’ attention turns to the Federal Reserve meeting in Jackson Hole later this week, where Federal Reserve Chairman Jerome Powell is expected to reinforce a strong commitment to avoid inflation at four-decade highs.

“I expect Powell to be more aggressive than expected from the current deal,” said Chris Grisanti, chief equity strategist at Mai Capital Management.

“Powell reiterates that his main goal is to beat inflation, not to support the equity markets or the bond market. The market yesterday was a reflection of that concern.”

Traders remain divided between a 50-basis-point hike and a 75-basis-point hike by the central bank, although economists polled by Reuters expect a 50-basis-point hike. Read more at FEDWATCH

At 11:35 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 102.99 points, or 0.31%, at 32,960.62, the S&P 500 (.SPX) was down 0.17 points at 4,138.16, and the Nasdaq Composite (.IX) was down. It was up 26.82 points or 0.22% at 12,408.39.

Healthcare stocks ( .SPXHC ) fell 1.4%, with UnitedHealth Group Inc ( UNH.N ) and Amgen Inc ( AMGN.O ) the best performers on the blue-chip Dow.

Energy shares (.SPNY) rose 3.7% to lead gains among 11 major S&P 500 sectors, tracking a jump in net prices as tight supplies returned to focus.

Macy’s Inc ( MN ) beat quarterly profit estimates and rose 6.7%, while Palo Alto Networks Inc ( PANW.O ) gained 10.9% after the cybersecurity firm posted good quarterly results and announced a stock dividend plan. Read more

Issue upgrades outnumbered decliners by a 1.47-to-1 ratio on the NYSE and a 1.36-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 30 new lows, while the Nasdaq recorded 26 new highs and 93 new lows.

Reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru; Editing by Sriraj Kalluvila and Shounak Dasgupta

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