Fed raised interest rates by 75 basis points but signalled that going ahead the pace of rate hikes will slow down. In an effort to cool inflation, Fed has now raised interest rates by 2.25 per cent having delivered a fourth-rate hike on July 27, 2022. US inflation had surged to a more than 40-year high of 9.1% in June 2022.
Federal Reserve Chairman Jerome Powell acknowledged some signs of moderation but said does not think the economy is in recession. The takeaway seems to be that Powell is less hawkish than expected.
“Global markets are currently more focused on recession than inflation. Thus, market pricing is based on – the more they hike now, the more they will have to cut later. Every bad data on the economy would be a positive for the bond markets,” says Pankaj Pathak, Fund Manager, Quantum Mutual Fund.
The US stock market reacted positively and ended higher with Dow, S&P 500 and Nasdaq 100 all closing in the green. The S&P 500 jumped 2.62% and Dow 30 registered a gain of 1.37%. Nasdaq 100 closed at 12,601.47 up by 514.57 points or 4.26% higher. PayPal Holdings, Datadog, MercadoLibre, Alphabet, and NVIDIA were among the top gainers in the tech-heavy index.
Apple, Amazon, Mastercard, Pfizer, Comcast Corporation, Intel Corporation and Honeywell International among others are expected to report results on Thursday, July 28.
As far as quarterly earnings so far reported by companies are concerned, it has been a mixed bag so far. Facebook parent Meta Platforms reported its first-ever quarterly sales decline and chip firm Qualcomm gave a lackluster forecast while Best Buy Co. cut its profit forecast, saying inflation is hitting consumer demand. Ford Motor Co.’s performance, however, beat estimates.
FactSet reports that big tech, semis, growth software, tech hardware, restaurants, hotels, airlines, retail, autos, oil services, and E&Ps were some of the standouts. Select food, HPC, beverages, and pharma were among the laggards.