NASDAQ 100, Dow Jones, S&P 500: Wall Street Surges on Fed’s Soft Landing Hope

Highlights

• Wall Street surges on signs of Fed’s policy easing and economic soft landing.
• Mega-cap tech stocks drive Nasdaq gains, Dow catching up.
• Reassuring Fed outlook and strong earnings boost market optimism.

Overview

Wall Street’s major indexes surged with optimism on Thursday, as investors welcomed signs that the Federal Reserve’s tightening policy may be reaching its end and the world’s largest economy was moving towards a soft landing. This positive sentiment was further bolstered by Meta Platforms’ impressive third-quarter revenue forecast, leading to an 8.2% jump in its shares. The parent company of Facebook also reported a substantial increase in second-quarter advertising revenue, surpassing expectations set by Wall Street.

Mega-cap growth stocks have been instrumental in driving the Nasdaq’s strong performance this year, but the Dow is now catching up as investors diversify their bets beyond technology. In fact, the blue-chip index is on track for an impressive 14th straight day of gains, its longest winning streak since at least 1920 according to Refinitiv data. The recent interest rate hike of 25 basis points by the Federal Reserve was in line with expectations, and traders now anticipate only a 20% chance of a surprise quarter-point increase in September.

Federal Reserve Chair Jerome Powell delivered reassuring news, stating that Fed staff no longer forecast a U.S. recession. These sentiments were corroborated by a Commerce Department report showing stronger-than-expected economic growth in the latest quarter. As Carol Schleif, the Chief Investment Officer at BMO Family Office, pointed out, this positive GDP print supports the notion of a soft landing, indicating that the Fed’s rate hikes have yet to cause a recession despite multiple increases over the past year.

Despite some mixed results in the market, with eBay’s third-quarter profit forecast falling below expectations and causing a 7% drop in its shares, chipmakers such as Nvidia, Micron, and Marvell Technology experienced gains of nearly 3% each. Additionally, shares of universal banks like Citigroup, Wells Fargo, and Bank of America were traded mixed ahead of the expected unveiling of a rule that could potentially raise capital requirements for the lenders.

Furthermore, Southwest Airlines suffered a 7.7% drop in shares after reporting a dip in second-quarter profit, while Royal Caribbean saw a surge of 7.6% after raising its annual profit forecast, indicating positive momentum in the travel sector.

In the European market, the European Central Bank continued its series of interest rate hikes, signaling its commitment to further tightening. Overall, advancing issues significantly outnumbered decliners on both the NYSE and Nasdaq, and new 52-week highs were recorded in both the S&P index and the Nasdaq.

With the Federal Reserve’s stance, encouraging economic data, and strong performances from key companies, investors remain optimistic about the market’s trajectory in the short term. As the Dow and Nasdaq continue to post gains, the market sentiment appears bullish, and there are high hopes for a positive outlook in the near future.