Stocks rise as investors bet on end to Fed hikes

November 2, 2023

51

Stocks climbed on Thursday as investors bet the Federal Reserve is close to wrapping up its rate-hiking campaign and assessed a fresh stream of corporate results.

The tech-heavy Nasdaq (^IXIC) soared more than 1.1%. The S&P 500 (^GSPC) was up about 1% while the Dow Jones Industrial Average (^DJI) gained roughly 0.9%.

All three major gauges closed Wednesday with strong gains after the Fed held interest rates steady at their highest range in 22 years. The market’s overall takeaway from Chair Jerome Powell’s comments on the decision is that the US central bank will stick with keeping rates unchanged in December.

Traders are now pricing in an 85% chance there will be no more Fed hikes this year, compared with 59% odds the day before its policymakers’ meeting, according to the CME FedWatch Tool.

Attention is now turning to earnings season, with Apple’s (AAPL) quarterly report due after-hours as the highlight in a packed Thursday. Top of mind will be what its results show about the iPhone situation in China and global consumer spending, after a mixed bag of reports from US tech giants so far.

Meanwhile, Starbucks (SBUX) shares popped in early trading after the coffee chain beat estimates for revenue and earnings. Shopify (SHOP) said it returned to a profit in the third quarter as it adopted AI, and its shares jumped 15%.

J

Earnings driving big stock moves in early trade

Third quarter results season carried on Thursday, with some companies’ reports driving massive stock moves.

Palantir (PLTR) soared after the company reported a record quarterly profit and attributed the success to artificial intelligence. Shares were up nearly 20%.

Shopify (SHOP) skyrocketed more than 20% on a positive AI story. The company said it’s launching new AI-powered tools for merchants. Notably, Shopify also announced operating expenses were $779 million in the most recent quarter, down 23% from the same period last year.

Starbucks (SBUX) shares rose more than 10% as the company beat Wall Street’s estimates for both revenue and earnings per share.

Meanwhile, Moderna (MRNA) shares slumped 18% at the open, the stock’s largest decline since November 2021. Shares regained some momentum during morning trade as investors digested a weaker-than-expected sales guidance driven by soft demand for the COVID-19 vaccine.
J

The market is saying no more rate hikes is now a ‘consensus view’

Federal Reserve Chair Jerome Powell was careful not to tip the central bank’s hand when discussing the path forward for interest rates.

“Slowing down is giving us, I think, a better sense of how much more we need to do, if we need to do more,” Powell said in a press conference on Wednesday after the Fed decided to hold rates steady for the second consecutive meeting.

Markets haven’t been so wishy-washy. Treasury yields, which often peak around when the fed funds rate peaks, hit their lowest levels in two weeks on Thursday. The tech-heavy Nasdaq Composite, which often lags when fears of further tightening persist, is up more than 1% for the second straight day.

And direct bets on the Fed’s path are increasingly leaning toward no more hikes too. The CME FedWatch Tool now projects an 80% chance the Federal Reserve doesn’t raise rates again this year, up from a 54% chance a month ago.

“Certainly it’s a scenario that we could get more rate hikes but I think the most likely scenario is that we are done,” Moody’s Analytics chief economist Mark Zandi told Yahoo Finance Live on Wednesday after Powell’s presser sent socks rallying into the market close. “And I think today’s market action would suggest that now is the consensus view.”
J

Stocks soar as yields slide

Investors piled into risk-on trades on Thursday as fears of another Federal Reserve rate hike have been pushed to the back burner.

The tech-heavy Nasdaq, which has lagged in the past when investors feared a rate hike spike, soared more than 1.2%. The S&P 500 (^GSPC) was up nearly 1% while the Dow Jones Industrial Average (^DJI) gained almost 0.7%.

Meanwhile, the 10-year Treasury yield fell to 4.62%, its lowest level in more than two weeks.
K

Stock futures step higher on hopes Fed is done with hikes

The major US stock indexes were poised Thursday to extend the previous day’s gains as investors assessed Federal Reserve Chair Jerome Powell’s comments after the central bank’s decision to hold interest rates steady.

Futures on the Dow Jones Industrial Average (^DJI) were up 0.50%, or 168 points, while S&P 500 (^GSPC) futures put on 0.71%. Contracts on the tech-heavy Nasdaq 100 (^NDX) were 1.09% higher.