U.S. and Canadian stocks ended Wednesday little changed following a Federal Reserve rate hike that left the door open for future hikes. But the Dow closed slightly higher, enough to score a 13-day winning streak - its longest since 1987.
The Fed lifted its benchmark overnight interest rate by a widely expected 25 basis points, marking the 11th hike in the U.S. central bank’s past 12 policy meetings.
Fed Chair Jerome Powell said in a press conference the central bank will make decisions meeting by meeting, closely watching economic data, but noted that a rate cut is very unlikely this year.
Goldman Sachs said in a note to clients that the Fed’s statement did not signal a slower pace of hikes in the future, but that the bank was expecting a hold in September.
“The message for the market was that it didn’t move the needle. There’s always a fear of a big surprise,” said Angelo Kourfafas, investment strategist at Edward Jones.
Powell’s message was clearly that the Fed will wait and see economic data to make new decisions, said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management. “I think the Fed won’t stop until they see wage inflation down.”
Following earnings on Tuesday, big tech companies’ shares had mixed reactions.
Microsoft eased 3.72% after laying out an aggressive spending plan to meet demand for its new artificial intelligence (AI)-powered services. The Windows maker still surpassed estimates for quarterly revenue and profit.
Alphabet gained 5.78% after the Google parent’s second-quarter profit exceeded Wall Street expectations on steady demand for its cloud services and a rebound in advertising.
The NYSE FANG+ index, which houses many megacap growth names, dropped 0.72%. The index has rallied roughly 75% so far this year on optimism over AI and hopes that the Fed is nearing the end of its rate hiking cycle.
“After extreme gains so far this year in big tech stocks, we have now moved to a phase where each company’s stock price is very non-correlated to one another,” said David Bahnsen, chief investment officer of the Bahnsen Group.
Meta Platforms rose 1.39% after Alibaba’s cloud unit said it would support the Facebook owner’s open-source AI model, Llama. In post market trading, shares rose a further 5% as the company reported better-than-expected earnings and issued optimistic guidance for third quarter.
As of Wednesday, 77.6% of the 152 companies listed on the S&P 500 that have reported earnings have beaten analysts’ expectations as compiled by Refinitiv.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 10.11 points, or 0.05%, to 20,561.64, within reach of its highest closing level in two and a half months posted on Monday.
The Bank of Canada has also been raising rates. It discussed delaying a hike at the last meeting before deciding on a raise to ensure progress in dampening inflation did not stall, according to minutes published on Wednesday.
The Toronto market’s heavily-weighted financials sector rose 0.3% and industrials were up 0.6%.
Healthcare jumped 4%, helped by a gain of 15.9% for shares of Tilray Brands Inc after the cannabis producer reported quarterly revenue that beat analyst estimates.
Rogers Communications Inc shares also climbed, ending up 2.8%, after the company raised its annual forecasts for adjusted core earnings and free cash flow.
Technology fell 1.7% as investors took in the latest earnings from CGI Group and sent the stock down 4.5%. Consumer staples fell 1.2%, weighed down by a 2.2% decline in shares of retailer Loblaw Companies Ltd after the company reported quarterly earnings.
The Dow Jones Industrial Average rose 82.05 points, or 0.23%, to 35,520.12; the S&P 500 lost 0.71 points, or 0.02%, at 4,566.75; and the Nasdaq Composite dropped 17.27 points, or 0.12%, to 14,127.28.
The Dow seesawed but ended higher, underpinned by a gain in Boeing after the planemaker posted a smaller-than-expected quarterly loss, along with a surge in cash flows.
Snap sank 14.23% after the photo messaging app owner gave a weaker-than-expected third-quarter forecast as it struggles to compete with tech giants for advertising dollars.
Union Pacific gained 10.42% after the railroad operator appointed Jim Vena as chief executive to succeed Lance Fritz.
Wells Fargo climbed 2.11% after the bank’s board authorized a new share buyback program of up to $30 billion.
Advancing issues outnumbered decliners on the NYSE by a 1.75-to-1 ratio; on Nasdaq, a 1.64-to-1 ratio favored advancers. The S&P 500 posted 29 new 52-week highs and no new lows; the Nasdaq Composite recorded 72 new highs and 92 new lows.
Reuters, Globe staff