Stocks are running on hints from the Fed of slower rises; Watch out for the “second day”

Overnight Dow Jones futures slipped slightly, along with S&P 500 and Nasdaq futures, with Meta Platforms and Qualcomm reporting earnings.




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The stock market rally made big gains on Wednesday after the Federal Reserve raised interest rates by 75 basis points for the second consecutive meeting. Federal Reserve Chairman Jerome Powell indicated that policy makers are looking towards slowing the pace of tightening down the road, even as the pressure on the economy continues and inflation remains focused.

Major indices were already modestly up to strong, buoyed by positive earnings feedback from Microsoft (MSFT), a Google parent the alphabet (GOOGL) and Energy Enphase (ENPH).

Senator Joe Manchin announced a deal with Senate Majority Leader Chuck Schumer late Wednesday on a bill to reconcile tax, climate and energy provisions. The deal, which could face a number of hurdles, includes a 15% minimum corporate tax rate, drug price controls, increased Obama support, and pro-solar and green terms.

Fed meeting

The Federal Reserve raised interest rates by 75 basis points on Wednesday afternoon, raising the rate to a target of 2.25%-2.5%.

The central bank slightly lowered its view of the economy, noting that “spending and production eased.” But “job gains were solid” while “inflation remained high”.

The Fed chief, speaking after the Fed meeting, stressed that policy makers are “strongly committed to lowering inflation.” He said the economy was “resilient” with “very tight” labor markets.

Powell said it would probably be “appropriate” to slow the Fed rate hike as it becomes “more restrictive”. He expects Fed rates to be “moderately tight” by the end of the year, which he said will be in the 3%-3.5% range.

After the Fed rate hike and Powell’s comments, odds of a move of 50 basis points on September 21 rose to 56% from around 50-50 before the Fed’s announcement. Moreover, markets are expecting modest moves during the last two Federal Reserve meetings of the year, ending the year around 3.25%-3.5%.

Main earnings

meta pads (META) and Qualcomm (QCOM) main earnings, with chip equipment maker L research (LRCX), Service now (Currently), O’Reilly Auto (Orly), Ford Motor (F) and Tilladock Health (TDOC) as reported late Wednesday.

Meta stock fell strongly after parent Facebook lost its earnings, reporting its first-ever revenue drop and the lowest.

Qualcomm’s stock fell slightly overnight due to poor revenue guidance.

LRCX stock is down slightly after better-than-expected quarterly results.

Shares are now lower as the business software giant cuts its subscription revenue guidance after slightly beating second-quarter views.

Ford stock emerged after easily beating views, with a 423% increase in EPS.

ORLY stock fell after earnings fell and the auto parts dealer fell.

TDOC stock fell after a telemedicine specialist steered to the low end of full-year goals. Teladoc posted a heavy loss in the second quarter due to large impairment charges, although revenue outperformed it slightly.

while, best buy (BBY) cut its full-year forecast, citing weak consumer spending amid rising inflation. BBY’s stock fell modestly.

early thursday, Pfizer (PFE) and merck (MRK) on tap. Pfizer stock is close to entering a trend line. Merck stock has been trading near the 50-day line as it has consolidated over the past two months.

late on Thursday, apple (AAPL) and Amazon.com (AMZN) on tap. Apple’s stock fell modestly below the 200-day streak after crossing the 50-day mark earlier this month. AMZN stock is also somewhat above the 50-day line.

Dow jones futures contracts today

Dow futures were down 0.1% against fair value. S&P 500 futures were down 0.1%. Nasdaq 100 futures lost 0.3%.

At 8:30 AM ET, the Commerce Department will release GDP for the second quarter. Economists expect an annual gain of 0.5%, after a 1.6% decline in the first quarter. Successive declines in GDP will not be an official sign of recession in the United States. Economists at the National Bureau of Economic Research judge business cycle changes, usually long after they have occurred.

Remember that overnight action in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.


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stock market rise

Wednesday’s stock market rally, led by big tech earnings, then added to gains on the Fed’s rate hike decision and Fed Chair Powell’s comments.

The Dow Jones Industrial Average rose 1.4% in stock market trading on Wednesday. The S&P 500 jumped 2.6%. The Nasdaq Composite Index is up 4.1%. Small cap Russell 2000 rose 2.3%.

US crude oil prices rose 2.4% to $97.26 a barrel. Natural gas futures were down 3.4%.

ETFs

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) is up 2.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) is up 1.1%. ETF (IGV) iShares Expanded Tech-Software Sector (IGV) jumped 4.3%, with Microsoft stock being a major component. The VanEck Vectors Semiconductor Index (SMH) jumped 4.7%, with shares of QCOM and Lam Research major components.

The SPDR S&P Metals & Mining ETF (XME) rose 3.4% while the US Global X Infrastructure Development Fund (PAVE) (PAVE) advanced 2.1%. The US Global Jets ETF (JETS) rose 3.1%. The SPDR S&P Homebuilders ETF (XHB) jumped 2.1%. The Energy Select SPDR ETF (XLE) rebounded 2.3% and the Financial Select SPDR ETF (XLF) 1.5%. Healthcare sector fund SPDR (XLV) rose 0.6%, with major holdings of Pfizer and MRK shares.

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rose 6.7% and the ARK Genomics ETF (ARKG) gained 3.9%.


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Meta earnings

Facebook’s Meta Platform profits and revenue fell, with the social media giant’s third-quarter profit falling.

Meta stock fell 4.5% overnight. Shares jumped 6.55% to 169.58 on Wednesday, moving on Google’s earnings and the general market recovery. META stock has sold 13% in the previous three sessions after weakening Explode, Explode SNAP Report and Guidelines.

Qualcomm Earnings

Qualcomm’s earnings and revenue slightly outperformed its fiscal third-quarter earnings and revenue perspectives, although gross margin was a bit thin. The wireless chip giant also posted a drop in fourth-quarter revenue.

QCOM stock fell 4% in extended trading. Shares rose 2.3% to 153.42 in trading Wednesday, off the 200-day streak.

Market Rise Analysis

The stock market rally enjoyed big gains on Wednesday after some notable losses over the past few sessions. The NASDAQ and S&P 500 rebounded from near the 50-day lines.

But watch out for the second day’s reaction. Leading indices also rose after the two previous Fed meetings, but then sold out the next day.

And while investors cheered Powell’s dovish hints a little on Wednesday, they may focus on why Fed rate hikes have slowed, namely the weak economy. This makes the Q2 GDP report particularly relevant.

Meanwhile, last week’s highs will be the next test for major indicators, followed by early June highs.

There is still plenty of stock to buy. Growth stocks may take off from three day consolidations but are often within ugly charts.

It was encouraging to see Microsoft and Google recover strongly despite the lack of earnings perspectives. kombat sele (TPX) Rebounded despite poor results and low steering.


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What are you doing now

With the Fed meeting and many big profits out of the way, some of the excessive uncertainty facing investors is fading away. A market rally traversing this news-packed week, so far, is certainly a positive.

There is still a reversal at the Fed’s “second day” meeting. Also, Apple and many others are still reporting this week, along with GDP data and other key economic reports.

With a limited number of good looking stocks in positions, investors may want to increase exposure via broad market or sector ETFs.

But if the market continues to improve, buying opportunities will arise and new positions will make solid gains. So work on your watch lists.

Read the big picture every day to stay in sync with market trend, stocks and leading sectors.

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