Twitter jumps on news Musk to resume purchase at $54.20/share
Rivian gains on reaffirming FY deliveries view; peers gain
U.S. job openings post biggest drop in 2.5 years in August
(Adds comment, U.S. market close at 4 p.m.)
By Herbert Lash, Ankika Biswas and Bansari Mayur Kamdar
Oct 4 (Reuters) - Wall Street rallied for a second straight day to end higher on Tuesday after softer U.S. economic data and a smaller-than-expected interest rate hike by the Australian central bank stirred hope that the Federal Reserve might temper its aggressive raising of rates.
While labor demand remains fairly strong, U.S. job openings fell by the most in nearly 2-1/2 years in August in a sign the Fed's mission to tame inflation by tightening policy was working to slow the economy.
Earlier, the Reserve Bank of Australia surprised markets with a smaller-than-expected interest rate hike of 25 basis points. Its cash rate rose to a nine-year peak after six rate hikes in as many months in a tightening cycle other central banks are engaged in too.
The RBA is the first major central bank to recognize that now is the time to slow down after aggressively raising rates this year, said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
"There's hope that the Federal Reserve at some point in the fourth quarter will say the same thing. Not stop raising interest rates, but just slow the pace," he said. "That's what the market's kind of rallying on below the surface."
Still, Fed Gov. Philip Jefferson said inflation is the most serious problem facing the U.S. central bank and it "may take some time" to address. San Francisco Fed President Mary Daly said the central bank needs to deliver more rate hikes.
Rate-sensitive tech stocks rose as yields on the benchmark 10-year Treasury fell for a second day in a row after the jobs data and RBA's surprise move. Valuations on tech and other growth stocks fall when their cost of capital rises.
The Dow Jones Industrial Average and S&P 500 posted their biggest two-day rallies since April 2020.
The repercussions of higher rates will likely be reflected in corporate results when earnings season begins in two weeks, said Dennis Dick, founder and market structure analyst at Triple D Trading Inc.
"We're still in for a tougher time here. I do think this earnings season is going to not be good," he said. "If one of the big guns warns that could end the rally rather quickly. This is just a relief really as opposed to the start of a new bull market."
Billionaire Elon Musk proposed going ahead with his original offer of $54.20 to take Twitter Inc private, two sources familiar with the matter said on Tuesday, sending the social media firm's shares surging. Tesla shares had been up about 6% before the news and immediately cut gains, but ending up on the day.
The megacap titans of Amazon.com Inc, Microsoft Corp, Apple Inc and Google parent Alphabet Inc led the rally.
According to preliminary data, the S&P 500 gained 112.84 points, or 3.09%, to end at 3,791.27 points, while the Nasdaq Composite gained 360.97 points, or 3.34%, to 11,174.20. The Dow Jones Industrial Average rose 823.27 points, or 2.81%, to 30,314.16.
Banks such as Citigroup, Morgan Stanley and Goldman Sachs climbed more than 3%.
The rally was broad, with just a dozen or so of the S&P 500 index trading in negative territory.
The rebound in stocks on Monday followed the S&P 500's lowest close in nearly two years last week that capped its worst monthly performance in September since March 2020.
Rivian Automotive Inc jumped after the electric-vehicle maker said it produced 7,363 units in the third quarter, 67% more than the preceding quarter, and maintained its full-year target of 25,000. (Reporting by Medha Singh, Ankika Biswas and Bansari Mayur Kamdar in Bengaluru; Editing by Anil D'Silva, Arun Koyyur, Sriraj Kalluvila and Richard Chang)