What is the reason behind the Thursday market movement as US stocks recover following Powell’s cautious stance on interest rates?

On Thursday, the U.S. stock market had a mixed performance as 10-year Treasury yields approached the 5% level. However, the market recovered after Federal Reserve Chair Jerome Powell gave a speech at the Economic Club of New York, causing traders to lower their expectations for interest rate increases. Powell emphasized the need for caution, acknowledging that increasing bond yields can lead to tightening in financial conditions, which can affect policy decisions. He also mentioned that even in a period of above-average economic growth, interest rates may still need to be tightened. As a result of Powell’s comments being seen as dovish, traders scaled back their expectations for interest rate hikes, with a 96% probability that rates will remain unchanged in November. Additionally, the market reacted to the earnings reports of major U.S. corporations, with Tesla experiencing a significant decline while Netflix saw a substantial increase. The S&P 500, Dow Jones Industrial Average, and Nasdaq 100 all had similar performances, with slight gains. The Russell 2000 index, on the other hand, declined slightly. In terms of sector ETFs, the Communication Services Select Sector SPDR Fund saw the largest increase, while the Consumer Discretionary Select Sector SPDR Fund fell in response to Tesla’s earnings. Unemployment benefits decreased, reaching the lowest level since January 2023. Various Fed speakers, including Chicago Fed President Austan Goolsbee and Fed Vice Chair for Supervision Michael Barr, made public appearances. Notable companies that reported earnings included AT&T, Alaska Air Group, Blackstone, KeyCorp., East West Bancorp, and Union Pacific Corporation. Crude oil prices rose while treasury yields and the dollar were mostly flat. European equity indices had a negative session, while gold and bitcoin saw increases.