Wall Street rallies on hopes of smaller Fed rate hikes

  • Some Fed Officials Show Willingness to Slow Hikes – WSJ
  • Alphabet, Twitter, Meta fall after Snap’s ad warning
  • AmEx down, braces for tougher macro with spare build
  • Verizon Communications Q3 profit falls due to subscriber loss
  • Indexes up: Dow 1.47%, S&P 1.27%, Nasdaq 1.04%

Oct 21 (Reuters) – The S&P 500 and Dow rose on Friday after a report said the U.S. Federal Reserve is likely to debate signaling plans for a smaller rate hike in December, while declines in social media companies capped gains on the Nasdaq.

Some Fed officials have begun to express their desire to cut the rate soon, according to the Wall Street Journal, signaling plans to approve a smaller increase in December.

“I would say the Fed is now looking at easing or slowing its rate hikes, underscoring its price stability campaign,” said Joe Brusuelas, chief economist at RSM, a US-based consultancy.

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Markets have been hammered by concerns that an aggressive rate hike cycle is tipping the US economy into recession, with the benchmark 10-year US Treasury yield hitting fresh 15-year highs earlier in the session.

Currency traders still expect a fourth hike of 75 basis points at the central bank’s November meeting. FEDWATCH

The report helped markets recover losses from earlier in the session when Snap Inc ( SNAP.N ) plunged 30.86% after posting its slowest quarterly revenue growth in five years as advertisers cut spending due to inflation and geopolitical concerns.

Other companies that rely heavily on advertising revenue such as Alphabet Inc ( GOOGL.O ) and Meta Platforms Inc ( META.O ) fell 0.20% and 2.52%, respectively, pushing the S&P 500 Communication Services sector index (.SPLRCL) down 0 .55%.

“It’s not uncommon for companies to cut advertising spending amid concerns about an economic downturn,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Conn.

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“Right now, you don’t want to be in a Snap or a Meta, and that will probably carry over to Alphabet.”

At 12:00 PM ET, the Dow Jones Industrial Average (.DJI) was up 444.56 points, or 1.47%, at 30,778.15, the S&P 500 (.SPX) was up 46.56 points, or 1.27% , to 3,712.

The Nasdaq Composite (.IXIC) rose 110.56 points, or 1.04%, to 10,725.41.

The third-quarter reporting season so far has been better than feared, prompting analysts to raise earnings expectations for S&P 500 companies to a 3.1% increase from 2.8% earlier in the week, according to Refinitiv data.

That’s still well below the 11.1% gain predicted in early July.

After the profit-driven gains from earlier this week, the S&P 500 and Nasdaq are set for their best week in six, while the Dow saw its biggest weekly gain since late June.

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Verizon Communications Inc lost 5.27% as its profit fell 23% and the carrier missed estimates for wireless subscribers.

American Express ( AXP.N ) fell 5.66% after it built up bigger provisions to prepare for potential defaults as an economic downturn looms.

Schlumberger ( SLB.N ) rose 9.2%, pulling the S&P 500 energy sector up 2.2%, after reporting a better-than-expected quarterly profit.

Advances outnumbered exits by a 1.62-to-1 ratio on the NYSE and a 1.39-to-1 ratio on the Nasdaq.

The S&P index posted seven new 52-week highs and 32 new lows, while the Nasdaq posted 25 new highs and 252 new lows.

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Reporting by Shreyashi Sanyal and Ankika Biswas in Bengaluru; Additional reporting by Bansari Mayur Kamdar; Editing by Anil D’Silva, Arun Koyyur and Shounak Dasgupta

Our standards: Thomson Reuters Trust Principles.

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