US Stock Market Overview – Stock Rally Following Fed Decision; Apple and Facebook BeatThe Fed cut rates by 25-basis points
US stocks closed higher on Wednesday following the Fed’s decision to cut interest rates. Despite a decline in the borrowing rate, the Fed announced that it will likely pause further cuts until the economic data justifies further stimulus. Ahead of the Fed’s decision the US Commerce Department reported that Q3 GDP increased by 1.9% which was better than expected. Earlier before the opening bell, ADP reported that private payrolls increased by 125K jobs. After the bell bellwether stocks Apple and Facebook reported better than expected earnings results.
Apple and Facebook Beat
Apple reported better than expected earnings results. The stock price was up more than 1.5% in after-hours trading. Revenue came in at $64 billion versus expectations of $62.99 billion. Earnings per share came in at $3.03 versus $2.84 estimate. The company reported that its Q1 revenue guidance was $85.5 billion to $89.5 billion versus. $86.92 billion estimates. iPhone revenue came in at $33.36 billion versus $32.42 billion estimates.
Facebook stock rose in after-hours trading after the company posted Q3 earnings that exceeded expectations. Earnings came in at $2.12 versus $1.91 per share estimate. Revenue came in at$17.65 billion versus $17.37 billion forecasts. Daily active users came in at 1.62 billion versus 1.61 billion forecasts. Monthly active users were 2.45 billion versus 2.45 billion forecasts.
The Fed Cut Rates as Widely Expected
The Federal Reserve reduced interest rates by 25-basis points, to a range between 1.50-1.75%. The move weighed on the dollar which paved the way for higher gold prices. The Fed’s policy statement released Wednesday showed that the Fed will now use a higher bar for rate reductions. The committee voted 8-2 to lower the benchmark rate. The two dissenters preferred to hold rates steady. Fed officials have now cut rates three times since July to cushion the economy against a slowdown in business investment.
GDP Was Stronger than Expected
US GDP came in stronger than expected according to the Commerce Department. US Q3 GDP rose 1.9% in the third quarter, down slightly from the 2% pace in the Q2. Expectations were for GDP to rise by 1.6%. The stronger data was the result of continued consumer spending as well as government expenditures. Personal consumption expenditures, rose at a 2.9% annualized rate while government spending grew at a 2% rate.