The Resurgence of US Stocks Amid Anticipation of Rate Cuts and Tech Results
US stocks made a strong comeback on Thursday, rebounding from the most severe Wall Street sell-off witnessed in months. Investors are revising their expectations regarding the timeline for rate cuts from the Federal Reserve, while also preparing themselves for a significant round of earnings reports from prominent tech companies.
The Standard & Poor’s 500 Index (S&P 500), a widely recognized barometer of US equities, rose by 1.2%. The Dow Jones Industrial Average, an index representing 30 large, publicly-owned companies based in the United States, gained nearly 1%. The Nasdaq Composite, an index heavily weighted with technology stocks that experienced a more than 2% decline on Wednesday, led the recovery on Thursday with a rise of 1.3%.
The financial world has been abuzz this week, with the focus firmly on the Federal Reserve on Thursday morning. Jerome Powell, the Chair of the Federal Reserve, catalyzed a shift in the central bank’s rate plans, serving as a reality check for investors who were hoping for immediate interest rate cuts. Powell hinted that it is improbable for the bank to initiate rate cuts at the Fed’s next meeting in March, a prospect that was considered a fifty-fifty chance earlier in the week.
According to the CME FedWatch tool, which provides real-time probability of Fed rate moves, investors were factoring in about a two-thirds possibility of the rates remaining unchanged at the March meeting. In contrast, there is almost unanimous expectation of a small or larger cut by May.
In the meantime, members of the influential “Magnificent Seven” tech giants stepped into the limelight after the market closed, with Apple (AAPL), Amazon (AMZN), and Meta (META) all presenting their earnings reports.
Meta shares surged over 12% in after-hours trading as the company surpassed Wall Street’s earnings expectations, announced a $50 billion share buyback program, and declared a cash dividend of $0.50 per share. Amazon stocks also saw gains, increasing by more than 4% in post-market trade after the company reported fourth-quarter earnings that outpaced analysts’ projections and offered a positive outlook for the forthcoming months.
On the other hand, while Apple’s revenue exceeded Wall Street predictions, concerns over the deceleration of sales growth in China seemed to negatively impact its shares ahead of the company’s earnings call.
This is a contrast from Tuesday’s initial batch of Big Tech results from Microsoft (MSFT) and Alphabet (GOOGL, GOOG), which didn’t meet investors’ high expectations and contributed to a downward trend in their stocks.
Lastly, there is one more critical economic data point expected this week. The nonfarm payrolls report, scheduled for release on Friday, will offer investors a glimpse into the health of the job market in January, providing further fuel for the narrative of the week.
