Tech stocks rose on Wednesday after the Federal Reserve latest interest rate hike after Fed Chairman Jerome Powell suggested signs of “disinflation” are building in the economy.
When the closing bell rang on Wall Street, the tech-heavy Nasdaq Composite (^IXIC) was 2% higher, driving the charge higher for markets on Powell’s comments.
The S&P 500 (^GSPC) closer to 1% higher, while the Dow Jones Industrial Average (^ DJI) increased by 0.03%, or just 8 points. The Dow was hit by energy stocks, which remained under pressure on Wednesday, as the price of WTI crude fell 3% to around $76.50 a barrel.
On Wednesday afternoon, the The Federal Reserve announced its latest interest rate hikea move that pushed the Fed’s benchmark policy rate to the highest level since October 2007. The Fed’s move marked its smallest increase in nearly a year.
In its statement, the Fed noted that inflationary pressures are easing, but said inflation “remains elevated” as price pressures persist throughout the economy. But at his news conference, Powell said that “for the first time” the Fed could say that “the disinflation process has begun.”
Investors took Powell’s comments as a sign that the Fed may be closer to pausing its current rate-hike campaign. Investors see a pause in interest rate hikes as a positive sign for riskier assets like tech stocks as they detailed by Yahoo Finance’s Julie Hyman earlier this week.
Wednesday’s rally was marked by Peloton (PTON), in which shares rose 26% on news Wednesday morning that the company reduced its cash burn to $94 million in its latest quarter, up from $747 million nine months ago. On an adjusted basis, the company reported $8 million in free cash flow during the holiday quarter.
“If you’ve been wondering whether or not Peloton can make an epic comeback, this quarter’s results show that the changes we’re making are working,” CEO Barry McCarthy said. wrote in a letter to shareholders.
A pandemic darling, Peloton joined Cathie Wood’s flagship ARK Innovation ETF (ARKK), which rose 4% on Wednesday, enjoying a Fed-induced boost.
These gains continued the market action that has dominated this year, as stocks capped off a strong start to the year on Tuesday, with the S&P 500 posting its best January since 2019, while the Nasdaq 100 enjoyed its biggest January rally since 2001, earning more than 10%
However, with earnings season in full swing, the news was not all good on Wednesday, with another disappointing quarter for Snap (SNAP) came out on Tuesday night attracting the most attention from investors.
Shares of the social media company fell 10% after the company told investors Its internal forecasts assume that revenue in its current quarter will be down 10-2% from the prior year.
Party Group (MTCH) and Electronic Arts (USAShares of ) were also down 5% and 9%, respectively, on Wednesday after reporting disappointing quarters Tuesday afternoon.
On the economic data side, new data on private payroll growth The ADP survey showed that private employers added 106,000 jobs last month, less than the 170,000 expected by economists.
In its report, ADP said weather affected its measure of the labor market, citing flooding in California and snowstorms in the central and eastern parts of the country during the reporting week.
“In January, we saw the impact of weather-related disruptions on employment during our baseline week. Hiring was stronger during other weeks of the month, in line with the strength we saw late last year,” the company said. ADP Chief Economist Nela Richardson.
data about job offers for december He suggested on Wednesday that demand for workers remains strong, with 11 million jobs available at the end of the month, up from 10.4 million at the end of November.
Elsewhere in economic data, readings for the manufacturing sector from S&P Global and the Institute for Supply Management showed activity remained subdued in the first month of 2023.
The latest ISM manufacturing PMI the reading fell to its lowest level since May 2020which economists see as another sign that recessionary pressures continue to mount on the US economy.
In a note to clients on Wednesday, Andrew Hunter, senior US economist at Capital Economics, wrote that a closer look at the ISM report suggests that “domestic economic weakness is increasingly the main driver of troubles.” of the manufacturing sector and, in general, the ISM The report reinforces our view that the US economy is close to recession”.
S&P Global the reading showed Manufacturing activity deteriorated at a slightly slower pace in January than in December, but still signals “a worryingly steep rate of decline in the health of the goods-producing sector,” according to Chris Williamson, chief business economist at S&P Global Market Intelligence. .
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