The stock market remained higher after the Federal Reserve raised interest rates by three-quarters of a percentage point. Markets are still betting that rate hikes could slow down soon.
Just after the Fed’s afternoon announcement, the Dow Jones Industrial Average had gained 102 points, or 0.3%. The S&P 500 was up 1.4%, while the Nasdaq Composite gained 2.6%.
The Fed lifted the benchmark lending rate by three-quarters of a percentage point, in line with expectations. The Fed said it expects “ongoing” rate increases. The Fed, trying to quell high inflation, is still in rate-hiking mode.
But Wednesday’s stock market rally continues, at least for the moment. With the S&P 500 still down 17% from its early January all-time high, the market has reflected much of the hit to economic demand from the rate increases. The market narrative recently has been that, with the economy taking a bit of a hit, the Fed could soon slow down the pace of rate hikes.
The Fed even said in its statement, “recent indicators of spending and production have softened.”
The bond market, for one, has already reflected much of the coming rate hikes. The 2-year Treasury yield, which attempts to forecast the level of the fed-funds rate a couple of years from the present, is just under its high for the day, trading at about 3.08%. It has remained below a multiyear high of 3.4%, hit in mid-June.
“From here, it is possible that the Fed slows its tightening pace,” wrote Seema Shah chief global strategist at Principal Global Investors.
That’s giving the stock market confidence, but also giving the market a boost is earnings that are better-than-feared.
Alphabet (ticker: GOOGL) missed earnings-per-share estimates, though sales were in line with expectations. Advertising sales grew in the quarter, which was a relief for tech investors worried about brands’ ad spending after Snap (SNAP) said its ad sales have been flat. Overall, Alphabet‘s
report was lifting the stock 6.1% after it had fallen more than 20% for the year.
“Google’s better-than-feared results continued in the face of an uncertain macro [environment],” wrote RBC analyst Brad Erickson.
Microsoft (MSFT) missed sales and earnings-per-share estimates. The top-line miss came because of a stronger dollar and weak PC results, stemming from production problems in China. But the company’s Azure cloud computing sales grew 40%, and management said on its earnings call that it expects to maintain double-digit overall sales growth this year. The stock, also beaten down for the year, was gaining 5.2% Wednesday.
“Ultimately when the onion is peeled away from results, the most important core business; cloud and commercial bookings was relatively rock solid,” wrote Dan Ives, Wedbush securities analyst.
The good numbers were lifting other software stocks. Salesforce (CRM), CrowdStrike (CRWD) and Cloudflare (NET) were up 4.6%, 2.9% and 1.6%, respectively.
Chipotle Mexican Grill (CMG) also missed sales expectations but beat earnings per share. The company said price increases drove away lower-income consumers, though the company’s operating margin still increased. The stock was gaining 13%.
Some stocks on the move Wednesday,
Texas Instruments (TXN) stock gained 4.2% after the company reported a profit of $2.45 a share, beating estimates of $2.13 a share, on sales of $5.21 billion, above expectations for $4.65 billion.
Mondelez International (MDLZ) stock was up 0.1% after the company reported a profit of 67 cents a share, beating estimates of 64 cents a share, on sales of $7.27 billion, above expectations for $6.79 billion.
Boeing (BA) stock gained 0.3% after the company reported a loss of 37 cents a share, wider than the expected loss of 14 cents a share, on sales of $16.68 billion, below expectations for $17.57 billion.
Bristol Myers Squibb (BMY) stock rose 0.7% after the company reported a profit of $1.93 a share, beating estimates of $1.77 a share, on sales of $11.9 billion, above expectations for $11.4 billion.
McDonald’s (MCD) stock dropped 0.2% after getting downgraded to Hold from Buy at Deutsche Bank.
Credit: www.marketwatch.com /