Summary:
- U.S. stocks closed higher on Thursday
- Higher than expected retail sales in August and higher gasoline prices contributed to the increase
- Despite the strong economic data, the Federal Reserve is expected to hold rates steady at its upcoming policy meeting
- The IPO market could rebound following the successful debut of ARM Holdings
- Moderna received a recommendation for authorization from European regulators for its COVID-19 vaccine
Despite stronger than expected economic data, the Federal Reserve is still expected to keep rates on hold, leading to a rise in U.S. stocks on Thursday. The Dow rose by 1 percent, while the S&P 500 and NASDAQ added 0.8 percent each.
Wall Street Ends Higher on Strong Economic Data Despite Anticipated Rate Hold
U.S. stocks closed higher Thursday as stronger than expected economic data did not alter the view that the Federal Reserve will keep rates on hold following its meeting next week. The Dow rose about 1 percent, while the S&P 500 and NASDAQ added about 8-tenths of 1 percent each.
Retail Sales Climb Higher Than Expected in August on Gasoline Prices
Retail sales climbed more than expected in August on higher gasoline prices. Higher prices gained more than predicted as well, but traders see a 97 percent chance of the Federal Reserve holding rates steady at its September 20 policy meeting and a near 67 percent likelihood of a further pause in November, according to the CME FedWatch tool.
User Fear of Missing Out Factor in Market Cycles
Pacer ETF's President Sean O'Hara suggests that a potential fear of missing out could be driving the market's move higher on Thursday. "When we get into these cycles in the market where you have the NASDAQ up 30 percent and the S&P up 15 percent, I think people start to think, well, maybe I've missed a little bit here. Maybe it's time for me to get going. I don't think it's the fundamentals that are driving the markets," he explained.
IPO Market Could Rebound After Successful debut from Arm Holdings
The IPO market could rebound following the successful debut of Arm Holdings. The chip designers' share surged 25 percent on its first day of trading on the NASDAQ, reaching a valuation above $60 billion. Moderna added 4 percent after a European Regulators Advisory Panel recommended authorizing an updated COVID-19 vaccine from the company.
Implications for the Federal Reserve Decision-Making
The stronger than expected economic data has not changed expectations that the Federal Reserve will hold rates steady at its September 20 policy meeting. Traders anticipate a further pause in November, as well. The steady rates may reflect a wait-and-see approach as the economy recovers from the COVID-19 pandemic.
Conclusion
Despite the anticipation of a rate hold, the U.S. stock market closed higher on Thursday, driven by favorable economic data and a potential fear of missing out among investors. The IPO market could rebound following Arm Holdings' successful debut, and Moderna's updated COVID-19 vaccine authorization could boost the biotech industry. The Federal Reserve's decision-making following its upcoming policy meeting will likely reflect a balance between cautiousness and optimism for the U.S. economy's recovery.
The IPO market could also rebound, thanks to the successful debut of ARM Holdings on the NASDAQ, while Moderna's COVID-19 vaccine received a recommendation for authorization from European regulators.