No interest rate hike in June made for a happy Wall Street

The S&P 500 is gaining ground as investors respond positively to the Fed’s decision to pause interest rate hikes for the first time after a series of 10 straight increases.

The market gauge climbed to surpass its March 2022 levels, erasing all losses registered since the FOMC took its first decision to start raising the federal funds rate.

Other main market indexes also reacted favorably. The Dow Jones was up 1.7% on the week at the time of this writing Friday, while the Nasdaq Composite was up more than 3.5%. The latter is riding a wave of optimism that has conquered the tech industry as recent developments in artificial intelligence fuel hype and new expectations for the sector.

A dip in inflation of almost an entire percentage point between April and May also boosted macroeconomic optimism for both investors and the Fed. The consumer price index for May came in this week at 4%, below expectations of 4.1% and significantly below April’s rate of 4.9%. Inflation reached its lowest level in two years.

Producer prices are also benefiting from lowering inflation. The producer price index registered a 28-month low this past week.

Mediterranean restaurant chain Cava was the talk of the Street this past week as the company debuted on the New York Stock Exchange. Shares soared as much as 117%, allowing the company to raise around $318 million in one of the 10 largest IPOs of the year.

Advanced Micro Devices unveiled a new chip design built for generative AI processing, causing several tech analysts to raise the company’s price target. Interestingly, investors didn’t respond well to the launch, and AMD stock had dropped more than 5% on the week by Friday. A slow market rollout for the new flagship chip MI300 — which could be out as late as mid-2024 — and a lack of a committed customer list could be behind the lack of investor excitement.

Creative software company Adobe beat estimates on its earnings call for the second quarter, taking shares up more than 9.2% on the week. Revenue increased 10% year-over-year to $4.82 billion, beating the consensus estimate of $4.43 billion.

The week ahead

All eyes will be on Jerome Powell in the coming week when the Fed chair testifies before the House and the Senate. His words will likely trigger a market response as he shares more clarity on the course of the economy and the FOMC’s policy going forward.

The stock market is closed Monday for the federal Juneteenth holiday.

After the long weekend, several large-cap companies are due to release earnings, including FedEx on Tuesday, Accenture on Thursday and Paychex Inc. on Friday.

Benzinga is a financial news and data company headquartered in Detroit.

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