Tech stocks extend post-Fed rally, Dow futures lag

U.S. stocks were mixed on Thursday, highlighted by a rise in tech stocks following the Federal Reserve’s latest interest rate hike and ahead of another round of earnings from the biggest players in the tech industry.

The tech-heavy Nasdaq Composite (^IXIC) climbed more than 3% in midday trading. The S&P 500 (^GSPC) gained 1.3%, while the Dow Jones Industrial Average (^DJI) lagged, falling 0.3%.

The yield on the benchmark 10-year US Treasury fell to 3.358% on Thursday morning. The dollar index rose 0.12% to $101.33

Major U.S. stock averages closed higher on Wednesday following the Federal Reserve’s much-anticipated rate hike of 25 basis points in another slowdown in its inflation-fighting campaign. Bullish comments from Chairman Jerome Powell on the state of inflation pushed markets higher.

The Fed’s move comes on the heels of recent economic data showing more evidence of inflation decelerating in recent months, though Powell stressed that the Fed’s campaign is far from over.

WASHINGTON, DC – FEBRUARY 01: Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a meeting of the Federal Open Market Committee on February 01, 2023 in Washington, DC. The Federal Reserve announced a 0.25 percentage point increase in interest rates to a range of 4.50% to 4.75%. (Photo by Kevin Dietsch/Getty Images)

The macroeconomic picture was mixed on Wednesday, with the latest ISM manufacturing PMI falling and consensus expectations missing. Meanwhile, the private payroll added 106,000 jobs in January, against 170,000 expected by economists.

The next major event on the macro front is Friday’s jobs report, which will be key for investors to further assess whether there is evidence of an easing in the labor market.

The December jobs report showed the labor market remains strong, with employers adding a robust 233,000 jobs for the month and an average monthly increase of 375,000 through last year.

The number of Americans filing new unemployment claims fell to 183,000 for the week ended Jan. 28, the Labor Department said Thursday, down from 195,000 expected by economists.

On the earnings front, Meta Platforms (META) released post-bell fourth-quarter results that beat revenue expectations, while trimming expenses by $5 billion. He also announced a $40 billion share buyback. Shares of the social media giant jumped more than 23% in midday trading Thursday morning.

The heaviest-weighted components of the S&P 500 — Amazon (AMZN), Apple (AAPL), Alphabet (GOOG) — are gearing up to release their 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 forecast weaker earnings in the near term, sending shares lower on Thursday. The company reported adjusted earnings of $1.62 per share, down 10% from the same period last year, but up from consensus estimates of $1.54 per share. Merck said revenue rose 2% to $13.83 billion from a forecast of $13.67 billion.

Elsewhere, Eli Lilly (LLY) reported stronger-than-expected fourth-quarter results on Thursday and raised its full-year earnings forecast. Eli Lilly said adjusted earnings for the quarter were $2.09 per share, versus a consensus forecast of $1.78. Revenue fell 8.75% from a year ago to $7.3 billion, a slight miss of expectations of $7.33 billion.

Overall, the fourth-quarter earnings season appears to be improving, noted Andrew Tyler, of the US Market Intelligence team at JP Morgan. But he said the question remains: “Will investors continue the soft landing narrative and current rally?”

The technology results come as layoffs have become evident in recent months in this sector, as companies large and small have reduced their workforces to accommodate their slowing growth after record profits during the pandemic. The total number of tech jobs cut was 41,829 over the past month, the highest of any industry, according to the Challenger, Gray & Christmas Inc. report.

Elsewhere in the markets, shares of Carvana (CVNA) soared as much as 33% on Thursday morning, taking the online used-car seller’s year-to-date gains to more than 280%.

Meanwhile, abroad, the Bank of England followed the Fed in the United States by raising interest rates from 0.5% to 4%, the highest level in 14 years. The 3.5% increase was eagerly awaited by economists. It is the bank’s 10th straight rate hike as it continues to try to rein in record inflation.

The European Central Bank – the central bank for the 20 countries that share the euro – raised interest rates an additional half point to 2.5%, in line with market expectations. The next rate hike would be of the same magnitude, the ECB said.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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