US stocks closed flat as the Fed keeps options open.
US stocks closed flat as the Fed keeps options open.
U.S. Stocks Little Changed Despite Fed Rate Hike as Dow Extends Winning Streak
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July 26 (Reuters) – U.S. stocks ended Wednesday little changed following a Federal Reserve rate hike that left the door open for future hikes, but the Dow scored a 13-day winning streak.
The Fed lifted its benchmark overnight interest rate by a widely expected 25 basis points, marking the 11th hike in the U.S. central bank’s past 12 policy meetings. Fed Chair Jerome Powell, in a press conference, stated that the central bank will make decisions meeting by meeting, closely watching economic data, while noting that a rate cut is very unlikely this year.
Goldman Sachs, in a note to clients, emphasized that the Fed’s statement did not signal a slower pace of hikes in the future, but the bank was expecting a hold in September. It is clear that the message for the market was that the rate hike didn’t move the needle, as there is always a fear of a big surprise, said Angelo Kourfafas, investment strategist at Edward Jones. Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, highlighted that Powell’s message was that the Fed will wait and see economic data to make new decisions, and that the Fed won’t stop until they see wage inflation down.
Despite the rate hike, the tech industry had a mixed reaction. Microsoft’s stock eased 3.72% after it announced an aggressive spending plan to meet the demand for its new AI-powered services. However, the Windows maker still surpassed estimates for quarterly revenue and profit. In contrast, Alphabet’s shares gained 5.78% after the parent company’s second-quarter profit exceeded Wall Street expectations, driven by steady demand for its cloud services and a rebound in advertising.
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The NYSE FANG+ index, which houses many large-cap tech stocks, dropped 0.72%. This index has rallied significantly this year on the back of investor optimism over AI and hopes that the Fed is nearing the end of its rate hike cycle. David Bahnsen, chief investment officer of the Bahnsen Group, pointed out that after the extreme gains in big tech stocks, we have now entered a phase where each company’s stock price is very non-correlated to one another.
In other technology news, Meta Platforms rose 1.39% after Alibaba’s cloud unit announced its support for the Facebook owner’s open-source AI model, Llama.
Earnings reports from various companies have also been pouring in. As of Wednesday, 77.6% of the 152 companies listed on the S&P 500 that have reported earnings have beaten analysts’ expectations.
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The Dow Jones Industrial Average rose 82.05 points, or 0.23%, to 35,520.12, while the S&P 500 lost 0.71 points, or 0.02%, at 4,566.75. The Nasdaq Composite dropped 17.27 points, or 0.12%, to 14,127.28.
Boeing played a significant role in supporting the Dow, as the planemaker posted a smaller-than-expected quarterly loss along with a surge in cash flows. The Dow achieved its longest winning streak since 1987, with 13 straight days of gains.
However, not all companies fared well. Snap sank 14.23% after giving a weaker-than-expected third-quarter forecast, struggling to compete with tech giants for advertising dollars. On the other hand, Union Pacific gained 10.42% after appointing Jim Vena as its new chief executive. Additionally, Wells Fargo climbed 2.11% after the bank’s board authorized a new share buyback program of up to $30 billion.
Overall, advancing issues outnumbered decliners on the NYSE and Nasdaq, indicating a generally positive sentiment among investors. The S&P 500 posted 29 new 52-week highs, while the Nasdaq Composite recorded 72 new highs and 92 new lows.
Despite the Federal Reserve rate hike, the U.S. stock market remains resilient, with the Dow extending its winning streak. The mixed reaction in the tech industry showcases the complexity of the market, where specific company performances have an increasingly non-correlated effect on stock prices. Investors continue to closely monitor earnings reports and economic data to make informed decisions in this dynamic environment.
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