Stocks jumped out of the gate Thursday, bouncing back from Wednesday’s Fed-induced decline. Falling oil prices and retreating Treasury yields lifted sentiment. Gains in several mega-cap tech stocks also boosted the equity market.
At the close, the blue-chip Dow Jones Industrial Average was up 0.6% at 51,778, the broader S&P 500 was 1.1% higher at 7,637, and the tech-heavy Nasdaq Composite gained 1.7% to 26,418.
All three benchmarks closed lower on Wednesday after the Federal Reserve raised the federal funds rate for the first time since 2023.
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“The plain fact is that inflation is too high and has been for too long,” said Chair Kevin Warsh in his press conference following the September Fed meeting. And Wednesday’s quarter-percentage-point rate hike “will support a timelier return to the Committee’s 2 percent [inflation] goal.”
“Now that we are past this rate hike, stocks can move on, as uncertainty has faded,” explains Bob Edwards, chief investment officer at Edwards Asset Management. “Stocks have the clarity needed from the Federal Reserve to resume their rally as the market’s wall of worry continues.”
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The decision also helped Treasury yields pull back from recent highs. The yield on the 2-year Treasury fell 5.4 basis points today to 4.673% and the 10-year Treasury yield declined 6.8 basis points to 4.936%.
“The bond market’s biggest moves are likely now in the rearview mirror,” says Edwards, “and there is now a good opportunity for investors after this big move to lock in these elevated yields.”
Oil prices also moved lower Thursday, with front-month West Texas Intermediate crude futures slipping 0.5% to $101.91 per barrel.
Nvidia leads tech stocks higher; Ciena sees strong revenue growth
Technology was the best-performing S&P 500 sector today, boosted by Nvidia‘s (NVDA) 2.5% gain. Shares dropped to start the week after the heads of several artificial intelligence (AI) firms warned of the technology’s safety risks and suggested putting guardrails in place.
But the industry’s explosive growth is showing no signs of slowing down. Earlier today, Nvidia CEO Jensen Huang told reporters in the U.K. that he expects the company’s chip sales to double next year on demand for all things AI.
Meanwhile, Ciena (CIEN, +1.1%), which makes high-speed networking equipment, said Wednesday that it expects revenue to grow roughly 30% each year over the next three years.
“Ciena’s rapidly expanding AI networking opportunity has led to surging orders and backlog, new markets, and new customers,” says Argus Research analyst Jim Kelleher.
While investment growth could weigh on margins in the near term, Kelleher believes CIEN’s revenue will grow at a faster pace than peers over the long term.
He has a Buy rating on the high-growth tech stock and a $550 price target, representing implied upside of 60% to current levels. That’s a massive return potential, but, as Kiplinger contributor Dan Burrows reminds us, “Committing capital based on a single data point is not an investment process.”
Generac tops the S&P 500 on new Amazon deal
Several industrial stocks also headed higher Thursday. Caterpillar (CAT) closed near the top of the Dow with its 2.0% gain, while Deere (DE) jumped 2.4%.
And Generac (GNRC) was the best S&P 500 stock today, rising 18.3% after the company inked a long-term supply deal with Amazon (AMZN, +2.1%).
Under the terms of the agreement, Generac will deliver up to $8 billion in backup generators to Amazon data centers through 2033. It also gives Amazon the right to buy up to 1.7 million GNRC shares at $201 apiece in multiple tranches, contingent on generator purchases.
“In our view, this is a significant positive for GNRC, a company that only announced the intent to enter the large data center market in 2025,” says UBS Global Research analyst Jon Windham. “If fully vested and exercised, the warrant shares represent at least 2.57% of GNRC’s fully diluted share count.”