US Stocks Rally Despite Stimulus Withdrawal, Evergrande Jitters

24 Sep 2021 · 3rd Party Analysis

US Stocks Rally Despite Stimulus Withdrawal, Evergrande Jitters

WRITTEN BY ThorFX

In Summary

  • US stocks advance after the Fed says monetary stimulus could be reversed in November
  • Investors have largely shunted troubled Evergrande out of their scope

Stocks on Wall Street reclaimed losses from Monday and Tuesday and even turned positive for the week on Thursday. A broad-based rally in US equities yesterday lifted the three major averages.

Wall Street Stocks Advance Broadly on Thursday

Following Wednesday’s strong upside swing, stocks surged on Thursday to their best two-day gain in about six months. The Dow Jones Industrial Average popped more than 500 points. Adding to its 340 points gained a day earlier, the 30-stock index has rallied nearly 850 points since the Evergrande-led global market selloff on Monday.

The S&P500 gained more than 1.2% yesterday. The broad-based stock market gauge was lifted by energy shares and financials such as Goldman Sachs and JPMorgan. The tech-heavy Nasdaq Composite climbed a little over 1% as tech stocks pared losses from Monday’s decline. Shares of Apple and Google parent Alphabet gained 0.6% apiece, Amazon closed up 1%, while Facebook gained 0.8% on the day.

All three major stock indexes are looking to end the week with gains. The Dow Jones is so far the leading performer, up 0.5% on the week. The S&P500 follows right after, higher by 0.3%. The Nasdaq Composite has eked out a small gain of 0.06% since Monday.

Evergrande Risks Still Remain

The renewed buying momentum in shares across the board arrived after investors have broadly eased their fears around a potential crisis in China’s property market. Stocks slipped Monday with the Dow losing over 600 points on concerns that Chinese developer Evergrande could be facing bankruptcy.

Due to the company’s many connections to external investors, banks, and shareholders, the potential downfall threatened to weigh on the global market. As a result, stocks everywhere dipped early in the week.

Still, Evergrande has on its back the burden of $300bn in debt. Adding to mounting troubles, the company missed its weekly payment. Evergrande had to pay interest amounting to $83 million by Thursday. Having missed that deadline, however, does not mean the company will default on its debt. Rather, it faces default if the payment is not done within 30 days.

Markets Rallied After Fed Statement

In other news, the market increased its bargain-hunting following a key Federal Reserve announcement. The US central bank said Wednesday it could easily go into tapering or reducing, the bond purchases as soon as next month.

In addition, Federal Reserve Chairman Jerome Powell presented an optimistic outlook toward economic growth. That helped buoy the stock market as participants elevated their hopes for a rosier future.

European Markets Slide Friday

On the other side of the Atlantic, European markets on Friday slipped into the red right out of the gate. The sudden downturn during the regular session followed an otherwise strong performance for the week. The Europe-wide Stoxx 600 declined half a percent at the open. Major averages in the old continent were lower between 0.3% and 0.7%.

Twitter Adds Bitcoin as a Tipping Option

Twitter sparked a move higher in the price of Bitcoin yesterday. On Thursday, the social media said in a call with reporters it has rolled out its Tipping feature. Included in the service is the option to give tips on Bitcoin. In other words, users of the platform could send each other Bitcoin as tips for the content they create on Twitter.

Initially, the Bitcoin tipping option would be available for iOS users with Android support coming soon. The news sent the original cryptocurrency to almost $45,000 per coin.

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