Tech stocks extend post-Fed rally, Dow futures lag

U.S. stocks were mixed on Thursday, highlighted by gains in tech stocks after the Federal Reserve’s latest rate hike and ahead of another earnings package from the tech industry’s biggest players.

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

The yield on the 10-year US Treasury note fell to 3.358% on Thursday morning. The dollar index increased by 0.12% to 101.33 dollars

Major U.S. stock averages closed higher on Wednesday after the Federal Reserve raised its expected interest rate by 25 basis points, marking another slowdown in its campaign to fight inflation. Positive comments from Chairman of the Board Jerome Powell on the inflation situation lifted the markets.

The Fed’s decision follows recent economic data showing more evidence of slowing inflation in the past few months, although Powell stressed the Fed’s campaign is far from over.

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

The macro picture was mixed on Wednesday, with the latest ISM manufacturing PMI declining and missing consensus expectations. Meanwhile, private payrolls reports added 106,000 jobs in January, below the 170,000 expected by economists.

The next major event on the macroeconomic front is Friday’s January jobs report, which is important for investors to further assess whether there is evidence of softening in the labor market.

The jobs report for December showed that the labor market remained strong as employers added a strong 233,000 jobs over the month and an average monthly gain of 375,000 over the past year.

The number of Americans who filed new jobless claims fell to 183,000 in the week ended Jan. 28, down from 195,000 expected by economists, the Labor Department reported on Thursday.

On the earnings front, Meta Platforms ( META ) reported fourth-quarter results after a call that beat revenue expectations, while expenses fell by $5 billion. It also announced a $40 billion share buyback. Shares of the social media giant surged more than 23% in midday trading on Thursday.

The S&P 500 heavyweights — Amazon ( AMZN ), Apple ( AAPL ), Alphabet ( GOOG ) — are set to report quarterly results on Thursday after the bell. All were up at least 3% in Thursday’s trading.

Merck & Co. ( MRK ) posted better-than-expected fourth-quarter earnings but forecast softer near-term earnings, sending shares lower on Thursday. The company reported adjusted earnings of $1.62 per share, down 10% from the same period last year, but above consensus estimates of $1.54 per share. Merck said revenue rose 2% to $13.83 billion, versus forecasts of $13.67 billion.

Separately, Eli Lilly ( LLY ) reported a stronger-than-expected fourth quarter on Thursday and raised its full-year profit forecasts. Eli Lilly said adjusted earnings for the quarter were $2.09 per share, versus the consensus estimate of $1.78. Revenue fell 8.75% to $7.3 billion from last year, slightly missing expectations of $7.33 billion.

Overall, the earnings season appears to have improved in the fourth quarter, noted Andrew Tyler of the US Market Intelligence team at JP Morgan. But he said the question remains: “Will investors follow the soft landing story and the current rally?”

The tech results come as layoffs in the sector have become apparent over the past few months, as firms come to terms with slowing growth after posting record profits during the pandemic. According to a report by Challenger, Gray & Christmas Inc., the total number of tech jobs cut in the past month was 41,829, the highest among industries.

Elsewhere in the markets, shares of Carvana ( CVNA ) surged as much as 33% early Thursday, pushing the online used car retailer’s year-to-date gain to more than 280%.

Meanwhile, abroad, the Bank of England followed the US Fed in raising interest rates by 0.5% to 4%, the highest level in 14 years. An increase of 3.5% was widely expected by economists. It is the 10th consecutive rate hike as the bank tries to tame record high inflation.

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

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

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