Wall Street Cheers Up As Fears Subside: 5 Top Gainers

Subdued inflation mollified concerns that the Federal Reserve might speed up rate hikes this year. In the wake of this, investors’ appetite for riskier assets, including tech and energy, has increased, pushing major bourses higher. In turn, market volatility continued to ebb.

Thus, picking stocks from desirable sectors seems prudent. And why not? Buffet’s bet on Apple Inc. (NASDAQ:AAPL) and Facebook, Inc.’s (NASDAQ:FB) shrugging off of the data fiasco have boosted investor confidence. Meanwhile, energy shares have shifted to high gear as oil touched its highest level since November 2014.

Wall Street Rallies: Here’s Why

The Dow Jones added nearly 200 points on May 10 to notch its longest string of advances — six straight days – since Feb 16. And if the blue-chip index can gain on May 11, it will mark its longest winning streak since Oct 5, 2017. The broader S&P 500 finished in the green, with the tech-heavy Nasdaq registering its fifth successive day of gains.

Stocks scaled higher as the tumultuous market phase seems to have faded — at least for the time being. Softer inflation numbers helped allay fears of faster interest rate hikes this year, while concerns about a US-China trade war have somewhat subsided.

Tepid Inflation Data, Trade War Fears Subside

Rising inflation played spoilsport at the beginning of the year. It compelled the Fed to quicken its monetary policy instead of raising rates at a gradual pace, aggravating market fears. But, softer-than-expected rise in consumer prices in the month of April cooled inflation fears. The Consumer Price Index (CPI) rose 0.2% in April from the prior month, per the Labor Department. Market pundits, however, expects the CPI to tick up to 0.3%.

Fears about a full-blown trade war between the two largest economies, the United States and China, have been doing the rounds for quite some time. This in turn could deal a massive blow to the global economy. However, China is expected to import more American goods as the two sides are looking for means to avert an all-out trade war.

Volatility Ebb

With investors’ anxiety seems to have eased, the Cboe Volatility Index (VIX) — Wall Street’s so-called “fear gauge” — fell for the sixth straight session, down 2.4% to 13.09 on May 10. Now, the index is likely to slip to its lowest close since Jan 26.

This indicated that the index has almost erased the huge spike witnessed in early February. During that time period, concerns over inflation saw the index more than double in a single session. Moreover, the VIX’s average level is 20. Thus, the current level is extremely low compared to historical standards.

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Appetite for Riskier Assets Rises

With fears taking a back seat, investors are looking to bet on riskier assets. Technology and Internet stocks regained their crown as the most sought-after stocks. Bellwethers Apple and Facebook, to name a few, saw their shares move north. The recent tax cut has already given the much needed windfall to tech, while cloud computing, artificial intelligence and big data remain growth areas (read more: Original post

Written By: Zacks Investment Research