Wall Street ends higher, gains led by banks, health care

By Carolina Mandle

(Reuters) – Wall Street’s main indexes posted gains on Thursday, mostly lifted by financial institutions and health care companies, as investors digested hawkish comments from policymakers that boosted bets on a big rate hike later this month.

Indices bounced back and forth in choppy trading as concerns persist about the Federal Reserve’s next steps to curb rising inflation.

“There’s just a lot of uncertainty and I think people aren’t going to make up their minds for more than five minutes or five seconds, you know, until there’s a little bit more clarity or light at the end of the tunnel.” said Grace Lee, senior portfolio manager of equity income at Boston-based Columbia Threadneedle Investments.

Money market traders see an 87% chance the Fed will raise interest rates by 75 basis points at this month’s meeting.

Bank of America, Barclays and Jefferies said they now see interest rates rising by 75 basis points. Barclays had previously said it could be a 50- or 75-basis-point hike, while Bank of America and Jefferies were betting on a 50-basis-point rise. Federal Reserve Chairman Jerome Powell said the central bank is “strongly committed” to reducing inflation and must continue until it gets the job done. Chicago Fed President Charles Evans joined his fellow policymakers in saying that easing inflation is “a job.” Investors are also looking to the August US inflation report next week for fresh clues on whether the Federal Reserve will raise interest rates by half or three-quarters of a percentage point at its next policy meeting on 20- September 21.

Concerns about aggressive monetary tightening around the world gripped equity markets on Thursday after the European Central Bank raised interest rates by an unprecedented 75 basis points and signaled further hikes. Meanwhile, data showed the number of Americans filing new claims for jobless benefits fell last week to a three-month low, underscoring the strength of the labor market even as the Fed raises interest rates. With the growing odds of another outsized rate hike, both the interest-sensitive S&P 500 banking index and the S&P 500 healthcare sector rose 2.8% and 1.8%, respectively. The health care sector was boosted by news that Regeneron Pharmaceuticals Inc’s anti-blindness treatment Eylea was shown to work as well when given at a higher dose with a longer interval between injections. Shares in the pharmaceutical company jumped 18.8%.

“People are embracing safety. Healthcare is a very safe sector and it’s still fairly cheap, as is the broader financial sector,” Lee said. The Dow Jones Industrial Average rose 193.24 points, or 0.61%, to 31,774.52, the S&P 500 gained 26.31 points, or 0.66%, to 4,006.18 and the Nasdaq Composite rose 70.26% to 70.38% to 21.1% or 0.1% to 0.1%. GameStop Corp rose 7.4% after the video game retailer reported a smaller-than-expected quarterly loss. American Eagle Outfitters Inc fell 8.7 percent after the apparel company missed estimates for second-quarter earnings and said it would end a quarterly dividend as it braces its finances against inflation.

Volume on US exchanges was 10.19 billion shares, compared to the 10.37 billion average for the full session over the past 20 trading days.

On Wednesday, Wall Street’s main indexes posted their biggest gain in about a month as bond yields eased after a recent rally on expectations of higher interest rates. However, the benchmark S&P 500 is down more than 16% year-to-date.

Advancing issues outnumbered declining ones on the NYSE by a ratio of 1.34 to 1. On the Nasdaq, a ratio of 1.48 to 1 favored the advancers.

The S&P 500 hit 7 new 52-week highs and 8 new lows. the Nasdaq Composite recorded 37 new highs and 153 new lows.

(Reporting by Carolina Mandl, with additional reporting by Sruthi Shankar, Ankika Biswas and Anisha Sircar in Bangalore; Editing by Saumyadeb Chakrabarty, Maju Samuel, Vinay Dwivedi and Aurora Ellis)

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