U.S. stocks ended mostly higher Thursday, with positive results from Meta helping to drive a 3.25% gain in the tech-laden Nasdaq composite index.
The S&P 500 rose 60 points, or 1.5% to 4,179.76, its highest close since late August.. The Dow sat out the rally, sliding by 0.1% as weakness in United Health Group (UNH) weighed on the index.
Updated at 12:15 pm EST
U.S. stocks extended gains Thursday, while the dollar held held gains against its global peers and Treasury yields steadied, as markets around the world reacted to a dovish rate hike from the Federal Reserve and focused on a trio of mega cap tech earnings after the close of trading.
The Fed's eighth consecutive rate hike lifted its benchmark Fed Funds rate to a range of between 4.5% and 4.75% late Wednesday, but small changes in the statement that followed -- which indicated a focus on the "extent" of future rate increases rather than their "pace" -- suggested the Fed may be nearing the end of its most aggressive tightening cycle in four decades.
Stocks ripped, as expected, when Chairman Jerome Powell provided only minimal resistance to the market's forecast of both a lower terminal rate and the chances for a cut later in the year, helping the S&P 500 close 42.6 points higher to boost the benchmark's year-to-date gain to around 7.7%.
Powell's tone was far less combative than in past press events, and his decision not to push back on both market forecasts for a 2023 rate cut -- even though he said that wasn't in his plans -- and its suggestion that rates will peak south of the Fed's current forecast -- even as he said a 'couple more' hikes were needed -- allowed rate doves to take flight.
His comments, while guarded, on the notion that price pressures were moving firmly to the downside were also noted by market participants, particularly in the bond market.
"Many things affect financial conditions, not just our policy, and we will take into account overall financial conditions along with many other factors as we set policy,.
Benchmark 10-year Treasury note yields tumbled around 12 basis points as Powell spoke to the media in Washington, and were pegged 5 points lower in early New York dealing at 3.367%, while 2-year notes fell to 4.071%. The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.4% higher at 101.605.
The CMEGroup's FedWatch tool now suggests an 82.7% chance of a follow-on hike of 25 basis points in March, but sees that as the likely last hike of the cycle, even as Powell indicated a preference for "a couple more" moves to the upside.
"Investors appears willing to fight the Fed – one of the many aphorisms on Wall Street that seasoned traders usually heed – and they do so at their own peril," said Chris Zaccarelli, CIO for Independent Advisor Alliance in Charlotte, North Carolina.
"This economy is much stronger than almost everyone believed and it is going to cause the Fed to overshoot on tightening, which will ultimately prove an even bigger risk to markets down the road, but in the meantime we are in a risk-on regime," he added.
With Fed risk neutralized, at least for the moment, investors are likely to switch focus to the trio of tech earnings -- from Amazon, Apple and Google -- after the closing bell.
Jobs data, however, continues to confuse as weekly claims for unemployment benefits for the period ending on January 28 fell by 3,000 to 183,000, well shy of the Street's 200,000 forecast, while the Bureau of Labor Statistics said unit labor costs for the fourth quarter rose only 1.1%, again falling shy of economists' estimates.
Key central bank decisions in Europe, as well as the United Kingdom, also arrived prior to the start of trading, with the European Central Bank lifted its benchmark deposit rate by 50 basis points, to a 2008 high of 2.5%, while adding it will stay the course in raising interest rates significantly at a steady pace".
The Bank of England, meanwhile, hiked its Bank Rate by 50 basis points to 4.5%, but dropped a previous pledge to "respond forcefully" to inflation dynamics, suggesting it may be reaching the peak of its rate-tightening cycle.
Heading into the opening hour of the trading day on Wall Street, the S&P 500 was marked 53 points higher, while those linked to the Dow Jones Industrial Average -- which carries few tech stocks -- fell 148 points.
The Nasdaq was marked 330 points, or 2.8% higher, as mega-cap heavyweights powered the tech-focused index.
Meta Platforms (META) shares were the market's notable mover, rocketing 23.3% after the social media group unveiled plans for a $40 billion stock buyback and forecast better-than-expected current quarter revenues despite a broader global slowdown in ad spending.
Apple (AAPL) shares moved 3.7% higher ahead of the tech giant's highly-anticipated December quarter earnings after the closing bell, with investors focused on the impact from last year's supply chain disruptions in China and near-term demand for its high-end iPhones.
Amazon (AMZN) shares jumped 7.4% ahead of its fourth-quarter earnings after the closing bell, powered in part by Meta Platform's solid ad sales outlook.
Another set of earnings, this time from the pharma sector, were also in focus Thursday, with Eli Lilly & Co. (LLY) falling 3.5% after it posted stronger-than-expected fourth quarter earnings, while lifting its full-year profit forecast, as sales of its blockbuster diabetes treatment, Trulicity, continued to power its top and bottom line.
Merck & Co. (MRK) fell 3.3% after better-than-expected fourth quarter earnings powered by impressive sales of its blockbuster cancer treatment Keytruda, but forecast softer near-term profits.
Honeywell International (HON), ended slightly higher after earlier slumping 1.8%. A weak near-term profit outlook and soft fourth-quarter sales clouded modestly better-than-expected earnings.
In overseas markets, Europe's Stoxx 600 closed 1.35% in Frankfurt trading, following the European Central Bank's rate decision, while Britain's FTSE 100 was up 0.76% in London as the pound retreated to 1.2261 against the U.S. dollar.
In overnight Asia trading, the region-wide MSCI ex-Japan index gained 0.3% and Japan's Nikkei 225 gained 0.20%
