- Microsoft, Alphabet results spark rally in megacap stocks
- T-Mobile up after raising subscriber growth forecast
- The Fed’s policy decision is expected at 2:00 PM ET
- Indices: Dow 0.39%, S&P 1.47%, Nasdaq 2.72%
July 27 (Reuters) – The tech-heavy Nasdaq jumped nearly 3 percent on Wednesday, leading Wall Street’s main indexes higher, as upbeat quarterly reports from Microsoft and Alphabet lifted sentiment ahead of a key U.S. interest rate decision later in the day.
Investors widely expect the US central bank to raise interest rates by another 75 basis points later on Wednesday, with the focus likely to shift to how deep signs of an economic slowdown are registered by its policymakers. Read more
Money market traders were even betting on a one-in-four chance that the Fed would surprise markets with an increase of more than 1 percentage point, according to CME Group’s Fedwatch tool.
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The decision is due at 14:00 ET (18:00 GMT), followed by a press conference by Federal Reserve Chairman Jerome Powell half an hour later, where he is likely to explain how the central bank views the recent economic environment.
“There’s a balancing act to be done, if they do too much or too little, it’s going to hurt, so they’re in a tough spot,” said Andre Backhos, managing director of New Vines Capital.
“The key is how it’s called, and how they color what’s out there in the world, from Fed’s eyes.”
Microsoft Corp ( MSFT.O ) climbed 5 percent after forecasting double-digit revenue growth this fiscal year on demand for cloud computing services. Read more
Alphabet Inc ( GOOGL.O ) added 7.3 percent as better-than-expected ad sales on Google’s search network eased concerns about a slowing ad market. Read more
The S&P 500 communications services index ( .SPLRCL ) added 4.3 percent, rising for the first time in five days, and led sector gains. Technology shares (.SPLRCT) rose 3%.
The results sent high-growth stocks higher.
Meta Platforms Inc ( META.O ) added 5.5% ahead of its quarterly report after markets closed, while shares of Apple Inc ( AAPL.O ) rose 1.7% and those of Amazon.com Inc ( AMZN. O) gained 4.4% before Thursday’s results.
Megacap growth stocks have been hit this year as the Federal Reserve aggressively raised interest rates to tame decades-high inflation. The future cash flows on which the valuation of these companies is based are heavily discounted when interest rates rise.
At 12:37 pm ET the Dow Jones Industrial Average (.DJI) was up 123.91 points, or 0.39%, at 31,885.45, the S&P 500 (.SPX) was up 57.50 points, or 1.47%, to 3,978.55, and the Nasdaq Composite (.IXIC) rose 314.00 points, or 2.72%, to 11,876.57.
PayPal Holdings Inc ( PYPL.O ) jumped 11.4 percent after a report that activist investor Elliott Investment Management was building a stake in the fintech giant. Read more
T-Mobile US Inc ( TMUS.O ) added 4.1 percent after raising its forecast for subscriber growth for the second time this year and beating expectations for quarterly profit. Read more
Advancers outnumbered decliners by a ratio of 2.77 to 1 on the NYSE and 2.11 to 1 on the Nasdaq.
The S&P recorded one new 52-week high and 30 new lows, while the Nasdaq recorded 39 new highs and 78 new lows.
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Reporting by Shreyashi Sanyal, Sruthi Shankar and Aniruddha Ghosh in Bengaluru; Editing by Sriraj Kalluvila and Anil D’Silva
Our standards: The Thomson Reuters Trust Principles.
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