Nasdaq 100 Rallies Over 4.0% on Dovish Fed/Strong Earnings, Alphabet Up 8.4%

Dovish Fed Boosts Wall Street

In defiance of the majority of market players who had been anticipating a 100 bps increase, the US Federal Reserve hiked interest rates by 75 basis points as expected on Wednesday, sending Wall Street soaring higher. The Fed Chair Jerome Powell also mentioned some recent positive trends regarding inflation, such as the recent decline in commodity prices and inflation expectations, in his post-FOMC meeting press conference. However, he reiterated that uncertainty is still very high and that the Fed is taking things meeting by meeting.

Markets perceived Powell's comments and the policy decision as dovish (or, at least, less hawkish than anticipated), which caused a decline in US yields. The Fed's interest rate expectation-sensitive 2-year yield fell 7 basis points to below 3.0 percent. Powell reaffirmed the Fed's goal of raising interest rates to 3.0-3.5 percent by the end of the year, but he made no mention of the possibility that the Fed would begin lowering rates in 2023.

The analysts at ING wrote in a note that "the Fed's work is not yet over and we look for a further 125bp of rises before the end of the year." Rate cuts will remain the main topic for next year, they continued, "but with recession risks rising and inflation expected to fall rapidly in 2023.

Nasdaq 100 Gains More Than 4%, Aiming for Early June Highs

Index heavyweights Microsoft, Alphabet (Google's parent company), Tesla, Apple, Amazon, and Meta Platforms (Facebook's parent company) all increased between 3.0 percent and 8.0 percent on Wednesday, marking the Nasdaq 100 index's best one-day performance since the pandemic-induced volatility of early 2020.

The good results from Microsoft and Alphabet, both of which estimated double-digit growth for the fiscal year 2022–2023 due to high demand for their cloud computing services, gave the major IT players an additional lift. Alphabet also reported stronger than anticipated Google search ad sales.

There had been some worries about ad market deterioration following last week's unfavorable earnings results from Snap and Twitter. After the end of the market, Meta Platforms will release its earnings report, and Apple and Amazon will also release their reports on Thursday.

The Nasdaq 100 index narrowly missed setting new monthly highs in the mid-12,600 range, with bulls once more anticipating a challenge of the early June highs above 12,800. Technicians are likely to view the index's robust recovery following Tuesday's retest of its 50-Day Moving Average slightly above 12,000 as a bullish indication.

The S&P 500 was most recently up roughly 3.0% after convincingly breaking through the 4,000 barrier and reaching new one-month highs in the 4,030s. The Dow Jones last increased by just under 2.0%.

Other notable movers included the share prices of PayPal and T-Mobile, which both posted better-than-expected Q2 results. PayPal's share price increased on news that activist investor Elliot Investment Management is increasing its stake in the company, and T-share Mobile's price increased after upgrading its subscriber growth forecast for the second time this year.