U.S. stocks finished mixed Thursday, highlighted by a vault upward by tech stocks following the Federal Reserve’s latest interest rate hike and ahead of another batch of earnings from the industry’s biggest players.
The technology-heavy Nasdaq Composite (^IXIC) soared by more than 3% at the close. The S&P 500 (^GSPC) added 1.5%, while the Dow Jones Industrial Average (^DJI) lagged, dipping 0.1%.
The yield on the benchmark 10-year U.S. Treasury note ticked down to 3.398% Thursday. The dollar index increased 0.5% to $101.70.
The moves continued a Wall Street rally that began Wednesday following the Federal Reserve’s highly anticipated rate hike to 25 basis points, which represented another slowdown in its inflation-fighting campaign. Chairman Jerome Powell’s upbeat comments on the state of inflation moved markets higher.
The Fed’s decision follows recent economic data that shows more evidence of decelerating inflation over the past few months, though Powell stressed the Fed’s campaign is far from over.
The next major event on the macroeconomic front is Friday’s January jobs report, which will be critical for investors to further assess if there’s evidence of an easing labor market. December’s jobs report showed that the labor market remains strong, as employers added a robust 233,000 jobs for the month and an average monthly increase of 375,000 throughout last year.
The number of Americans filing new unemployment claims fell to 183,000 for the week ended Jan. 28, the Labor Department said on Thursday, down from 195,000 expected by economists.
Tech stocks continued to power the post-Fed rally on Thursday. Meta Platforms (META) soared after reporting fourth quarter results that topped revenue expectations, while delivering a $5 billion expense cut. It also announced a $40 billion stock buyback. Shares of the social media giant surged more than 23%.
The S&P 500’s most heavily weighted components — Amazon (AMZN), Apple (AAPL), Alphabet (GOOG) — are gearing up to report quarterly results on Thursday after the bell. All were up at least 3% in Thursday trading.
Merck & Co. (MRK) posted better-than-expected fourth quarter earnings, but forecasted softer near-term profits, sending shares lower on Thursday. The company reported adjusted earnings at $1.62 per share, down 10% from the same period last year, but up from the consensus estimates of $1.54 per share. Merck said revenue rose 2% to $13.83 billion, against the forecasts of $13.67 billion.
Separately, Eli Lilly (LLY) reported stronger-than-expected fourth quarter earnings Thursday, and lifted its full-year profit forecasts. Eli Lilly said adjusted profits for the quarter came in at $2.09 per share, against consensus forecast of $1.78. Revenue fell 8.75% from last year to $7.3 billion, a slight miss of expectations of a $7.33 billion.
Overall, fourth-quarter earnings season seems to be improving, noted Andrew Tyler, US Market Intelligence team at JP Morgan. But he said the question remains: “Will investors chase the soft landing narrative and the current rally?”
The tech results come as layoffs have become evident over the last few months in this sector, as firms small and large cut staff to reckon with their slowing growth following record profits during the pandemic. The total number of tech jobs slashed has been 41,829 within the last month, the highest across industries, according to report from Challenger, Gray & Christmas Inc.
Elsewhere in markets, Carvana (CVNA) shares rallied as much as 33% Thursday morning, bringing the online used-car seller’s year-to-date gains to over 280%.
The proxy battle between Disney (DIS) and activist investment firm Trian Management LP has another twist ahead of the next annual meeting. Disney blasted the activist investor, Nelson Peltz, his firm, and his son, Matthew Peltz, whom Trian is vying to be a possible alternate candidate on the board, on Thursday. Shares were up 3% following Disney’s response.
Meanwhile, overseas, the Bank of England followed the Fed in the U.S. by lifting interest rates by 0.5% to 4%, the highest level in 14 years. The increase from 3.5% was highly expected by economists. It’s the bank’s 10th consecutive rate hike as it continues trying to tame record high inflation.
The European Central Bank — the central bank for the 20 countries that share the euro — raised interest rates by another half a percentage point to 2.5%, in-line with market expectations. The next rate increase would be of the same size, the ECB said.
