Tech powers Wall Street’s recovery; banks reel under Fed’s dovish stance

(Reuters) – A tech rally led by Apple Inc pushed Wall Street’s main indexes higher on Thursday, offseting losses in U.S. lenders after the Federal Reserve decided not to raise interest rates this year.

FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., March 20, 2019. REUTERS/Brendan McDermid

In a big shift to their outlook, policymakers said the Fed’s benchmark overnight interest rate was likely to remain at current levels at least through this year and flagged an expected slowdown in the economy.

Interest rate sensitive banking stocks fell 1.54 percent, while the broader financial sector slipped 0.49 percent and was the only S&P sector trading lower.

“After the initial reaction on the Fed’s growth outlook and that being a reason why they’re not going to raise interest rates, the markets believe that with the Fed on hold the economy will start to show improvement,” said Carin Pai, executive vice president at Fiduciary Trust Company International based in New York City.

“It’s a broad market rally, but the performance of the market is still being led by the cyclical areas, which suggests there is a risk on sentiment.”

Technology stocks rose 1.68 percent on the back of gains in Apple Inc and chipmakers.

The iPhone maker’s shares jumped 3.2 percent after analysts said they expected the company’s video service, which launches on Monday, to make a material impact on its future earnings.

Micron Technology Inc jumped 7.9 percent after the company said it sees a recovery in memory chips, driving a 2.84 percent gain in the Philadelphia chip index.

Expectations of a largely dovish Fed and hopes of the United States and China reaching a trade resolution have spurred a rally in stocks this year, with the S&P 500 now just 3.3 percent away from its record closing high in September. Investors will now keep a close watch on trade talks as top U.S. officials travel to Beijing next week to resume negotiations.

At 12:38 p.m. ET the Dow Jones Industrial Average was up 136.40 points, or 0.53 percent, at 25,882.07. The S&P 500 was up 18.35 points, or 0.65 percent, at 2,842.58 and the Nasdaq Composite was up 64.71 points, or 0.84 percent, at 7,793.68.

The tech-heavy Nasdaq is set to post its fifth consecutive session of gains.

Among stocks, Biogen Inc tumbled 28.4 percent after the drugmaker and its partner Eisai Co Ltd said they would discontinue two studies testing an Alzheimer’s drug.

Levi Strauss & Co surged 33.2 percent and was the second biggest percentage gainer across U.S. stocks, after the 165-year-old U.S. jeans maker returned to the public market after three decades.

Conagra Brands Inc jumped 11.2 percent after the food packaging company’s quarterly profit topped estimates.

Advancing issues outnumbered decliners by a 2.36-to-1 ratio on the NYSE and by a 1.84-to-1 ratio on the Nasdaq.

The S&P index recorded 40 new 52-week highs and three new lows, while the Nasdaq recorded 69 new highs and 22 new lows.

Reporting by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru; Editing by Anil D’Silva and Arun Koyyur

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