- Microsoft and Alphabet results spark a rally in megacap stocks
- T-Mobile rises after raising subscriber growth forecast
- The Fed’s policy decision is expected at 2 pm ET
- Indices: Dow 0.39%, S&P 1.47%, Nasdaq 2.72%
July 27 (Reuters) – The tech-heavy Nasdaq rose nearly 3 percent on Wednesday, lifting Wall Street’s main indexes higher, as upbeat quarterly reports from Microsoft and Alphabet lifted sentiment ahead of a key decision on US interest rates later today.
Investors widely expect the U.S. central bank to raise interest rates by 75 basis points later on Wednesday, with attention likely to shift to the depth of signs of an economic slowdown among its policymakers . Read more
Money market traders were even betting on a one-in-four chance the Fed would surprise markets with a bigger hike of 1 percentage point, according to the CME Group’s Fedwatch tool.
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The decision is due at 2:00 pm ET (1800 GMT) followed by a press conference from Federal Reserve Chairman Jerome Powell half an hour later, where he is likely to elaborate on how the bank sees central to the recent economic environment.
“There’s a balancing act that has to happen, if they do too much or too little, it’s going to hurt them, so they’re in a tough position,” said Andre Bakhos, managing director of New Vines Capital.
“The key is how it’s called and how they color what’s in the world, from the Fed’s eyes.”
Microsoft Corp ( MSFT.O ) rose 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% as better-than-expected Google search ad sales eased concerns about a slowing ad market. Read more
The S&P Communications Services 500 (.SPLRCL) rose 4.3%, rising for the first time in five days and leading sector gains. Tech stocks (.SPLRCT) rose 3%.
The results led to a rally in high-growth stocks.
Meta Platforms Inc ( META.O ) rose 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% ahead of its results on Thursday.
Megacap growth stocks have taken a hit this year as the Federal Reserve raised interest rates aggressively to control decades-high inflation. The future cash flows on which the valuation of these companies is based are heavily discounted when 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. The 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 said activist investor Elliott Investment Management was building a stake in the fintech giant. Read more
T-Mobile US Inc ( TMUS.O ) added 4.1% after raising its subscriber growth forecast for the second time this year and beating quarterly profit expectations. Read more
Advances in issuance outnumbered decliners by a ratio of 2.77 to 1 on the NYSE and by a ratio of 2.11 to 1 on the Nasdaq.
The S&P index hit a new 52-week high and 30 new lows, while the Nasdaq hit 39 new highs and 78 new lows.
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Reporting by Shreyashi Sanyal, Sruthi Shankar and Aniruddha Ghosh in Bangalore; Editing by Sriraj Kalluvila and Anil D’Silva
Our standards: the Thomson Reuters Trust Principles.