Nasdaq, S&P off session highs but on track to extend post-Fed rally; Dow in the red
franckreporter
U.S. stocks on Thursday had come off their session highs, but sentiment was overall positive as Meta's rally added to post-Fed elation. The Nasdaq and S&P 500 were on track to extend their rally from the previous session.
The more than 20% surge in Meta's shares also helped megacap technology names advance. Meanwhile, the Dow was weighed down by a retreat in shares of its healthcare components.
Into the final hour of trading, the tech-heavy Nasdaq Composite (COMP.IND) was up 2.51% to 12,112.79 points, after having gained more than 3.5% earlier. The benchmark S&P 500 (SP500) added 0.96% to 4,156.78 points.
The Dow (DJI) was down 0.53% to 33,913.65 points, dragged down by a fall in shares of UnitedHealth (UNH), Merck (MRK) and Amgen (AMGN).
Of the 11 S&P sectors, six were trading in the green, led by Communication Services. Energy topped the losers.
Wall Street's major indices surged towards the end of the trading session on Wednesday, after Federal Reserve chair Powell acknowledged that a "disinflationary process" had started. However, he also reiterated that the central bank still had a lot of work to do and signaled that more rate hikes would be coming. Many market participants had hoped that Powell would signal that the central bank was close to pausing its hiking cycle.
"While Powell’s assessment of financial conditions and market pricing of the Fed were dovish, his remarks about the near-term path for policy were more balanced. He stood by the statement’s language that ongoing hikes will be appropriate. He was also concerned about the risk of doing too little, and he doesn’t want to find out in six to 12 months that they were 'close but didn’t get the job done.' ... He also hinted that the (Fed) minutes would relate the Committee’s discussion about the conditions for pausing," JPMorgan's Michael Feroli said in a note on Wednesday.
According to the CME FedWatch tool, markets are now pricing in a 82.7% probability of another 25 basis point hike at the Fed's March meeting, with a 17.3% probability of no hike at all.
Central banks continued to be in focus on Thursday. The Bank of England and the European Central Bank raised rates by 50 basis points each, as expected. The former indicated that a pause could be coming, while the latter said it expects to increase rates again in March. Market participants seem to be reading the actions as signs that perhaps rate-hike cycles in both the U.S. and the Europe and UK might be nearing an end.
Turning to the bond markets, yields declined again after the previous session's tumble. The 10-year Treasury yield (US10Y) wa flat at 3.40% and the 2-year yield (US2Y) slid 1 basis point to 4.09%.
In Thursday's economic calendar, the number of Americans filing for weekly jobless claims fell unexpectedly by -3K to 183K, versus the forecasted 200K figure.
At the same time, Q4 productivity and unit labor costs came in. Labor costs came in at +1.1% versus the anticipated +1.5% data point. Productivity costs increased +3% versus the forecasted +2.4%.
In earnings news, Meta dominated headlines. The Facebook-parent's quarterly results, guidance and a $40B share buyback program cheered investors.
"The market, which has its eyes firmly on the future, has clearly priced in a rebound of Meta’s advertising revenues. With peak inflation coming into view, and the recovery lane for the economy well signposted, there’s cautious optimism Meta can prove its bulls right,” Hargeaves Lansdown analyst Sophie Lund-Yates said.
Meanwhile, healthcare giant Merck slipped after its earnings declined. Eli Lilly (LLY) was among the top percentage losers on the S&P 500 (SP500) after reporting lower than expected revenue.
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