U.S. stocks saw a rise on Thursday following a selloff on Wall Street the day before when the Federal Reserve smashed hopes for early interest rate reduction. Later in the day, investors refocused their attention on upcoming tech earnings and Big Tech results. The tech-heavy Nasdaq led the charge, with major players like Apple, Amazon, and Meta Platforms set to release their Q4 reports after the market closed.
The FOMC's decision not to alter interest rates on Wednesday came as no surprise, but Chair Jerome Powell's statement about the possible absence of a March rate reduction triggered substantial financial upheaval.
Impact of Fed-driven Selloff
On Wednesday, the Dow experienced its sharpest loss in six weeks, while the S&P 500 and the tech-heavy Nasdaq had their worst one-day percentage declines since September and October, respectively. By holding interest rates steady on Wednesday, the Fed dispelled expectations that policy easing would begin in March and reassured investors of its unwavering commitment to combating inflation.
Investors became concerned about the health of American regional banks' finances after New York Community Bancorp revealed inadequate information regarding its commercial real estate portfolio. In the development, it resulted in a more significant 10% decline in the KBW Regional Banking index.
According to LSEG, out of the roughly 208 S&P 500 businesses that have released earnings thus far, 80% have surpassed analyst estimates. Analysts' current Q4 profit growth projections for the S&P 500 are 6.4% year over year, which is an improvement above the 4.7% growth predicted on 1 January. Northey stated that these reports align with their view of the economic trajectory for 2024, which entails continued growth, albeit at a slower pace.
Focus Shifts to Big Tech Earnings
The stock of Meta Platforms (META.O) increased during extended trading after the company announced its first-ever dividend and reported higher-than-expected sales. Meta Platforms' advertisement division should continue to function relatively undisturbed by generative AI. After releasing its earnings, Amazon.com (AMZN.O) opens a new tab and gains in post-market trading. Apple Inc. (AAPL.O) opened a new tab and saw a slide in extended trading after earnings and revenue above analyst projections, but China sales fell short of objectives.
The Federal Open Markets Committee (FOMC) maintained its policy rate at its current level on Wednesday, as anticipated. During his press conference, Fed Chair Jerome Powell described a rate cut in March as "unlikely," which caused the market's expectations of a dovish Fed pivot in the first quarter to be reset and precipitated a sharp selloff.
The S&P 500 was up 21.14 points, or 0.44%, at 4,866.79, the Nasdaq Composite was up 112.80 points, or 0.74%, at 15,276.81, and the Dow Jones Industrial Average was up 50.64 points, or 0.13%, at 38,200.94 at 10:04 a.m. ET.
Earnings and Jobs Report in Focus
New data released on Thursday revealed that initial jobless claims for the week ending 27 January increased to a seasonally adjusted 224,000, above estimates of 212,000. In the meantime, according to a different survey, companies in the financial and technology industries started restructuring initiatives in January, resulting in a 10-month high for job loss announcements. Separately, industrial activity increased to 49.1 in January from 47.1 in December, according to the Institute for Supply Management's PMI index.
The Federal Reserve's policy decisions and subsequent market reactions will influence investor confidence and overall market trends. As the week unfolds, investors will remain attuned to both the earnings reports and broader macroeconomic developments as they navigate the ever-changing investment landscape.