Stocks ended higher Wednesday, powered by gains in chip sector, as the Federal Reserve left its benchmark lending rate steady at the highest levels in more than two decades, while hinting at the chances of a September reduction.
The Dow Jones Industrial Average gained 99.46 points, or 0.24%, to finish the session at 40,842.79, while the S&P 500 rose 1.58% to 5,522.30 and the tech-heavy Nasdaq surged 2.64% to end the day at 17,599.40.
The Fed's Open Market Committee, which sets monetary policy, held its key rate at between 5.25% and 5.5%, the highest in 22 years. The unanimous move was widely expected on Wall Street following the central bank's two-day policy meeting in Washington.
Charlie Ripley, senior investment strategist for Allianz Investment Management, said “close, but not close enough was the position the Fed held at today’s Fed meeting.”
“The string of cooling inflation and labor market data has helped build the case for cutting rates, but the committee as a whole is not quite there,” he said. “With monetary policy acting with a lag, the Fed probably could have initiated a rate cut at this meeting, but perhaps Chairman Powell is looking for more bang with his buck at the September meeting.”
Ripley noted that a lot can change from now until the September meeting “and given the expected path of inflation and the reality that one rate cut is priced in, the impetus for a rate cut greater than 25 basis points is likely to build.”
Many tech companies ended in the green, including Nvidia, Advanced Micro Devices and Apple.
Updated at 2:28 PM EDT
A hint, but that's it
The Fed hinted at a September rate cut, but didn't provide a great amount of detail to support that assumption as it held its benchmark lending rate steady at a 22-year high of between 5.25% and 5.5%.
U.S. stocks were little changed following the Fed statement, with eyes on Chairman Jerome Powell's news conference at 2:30 pm Eastern time, with the S&P 500 last marked 92 points, or 1.7%, higher, on the session.
The tech-focused Nasdaq, meanwhile, was held its single-day gain of 2.5%, or 432 points, while the Dow was last marked 315 points to the upside.
Benchmark 10-year Treasury note yields, which have fallen around 20 basis points since the Fed's last rate decision in June, were last marked 1 basis point higher on the session at 4.126%.
As expected, the #FederalReserve left interest rates unchanged and shifted the balance of risks in favor of less labor market strength.
— Mohamed A. El-Erian (@elerianm) July 31, 2024
The focus now shifts to Chair Powell's press conference where he will be pressed on the likelihood of a September rate cut.#economy…
Updated at 12:43 PM EDT
Fed on deck
Bond markets are rallying hard into the Fed rate decision at 2:00 pm Eastern time, with 10-year notes falling to 4.098% in mid-day trading and 2-year notes trading at 4.352%.
The U.S. dollar index, which tracks the greenback against a basket of six major global currencies, was last marked 0.27% lower at 104.217.
Related: Fed to signal timing of first interest rate cut as inflation slows
Updated at 10:51 AM EDT
All chips in
Nvidia is leading chip shares higher in early trading, rising more than 10.8% to $114.90 each, following a better-than-expected second quarter update from rival AMD and the anticipated boost from billion in AI-related capex spending from Microsoft.
The Philadelphia Semiconductor index, the sector benchmark, was last up 5.1% on the session, with AMD rising 5.6%, Micron Technology (MU) up 6.8% and Broadcom (AVGO) gaining 9%.
Related: Top analyst puts Nvidia stock on key list after $500 million slump
Updated at 9:35 AM EDT
Tech surge
The Nasdaq was marked more than 325 points, or 1.9%, in the opening minutes of trading, with the S*P 500 rising 65 points, or 1.09%.
The Dow edged modestly higher, rising 44 points, while the Russell 2000 rose 0.35%
In the bond market, benchmark 10-year bond yields retreated further following the softer-than-expected ADP report and were last marked at 4.101%, with 2-year notes at 4.342%.
S&P 500 Opening Bell Heatmap (Jul. 31, 2024)$SPY +1.19%🟩$QQQ +2.06% 🟩$DJI +0.11%🟩$IWM +0.93%🟩 pic.twitter.com/WscetofOez
— Wall St Engine (@wallstengine) July 31, 2024
Updated at 8:25 AM EDT
Softening slowly
American employers added 122,000 new private sector jobs last month, payroll processing group ADP reported, a smaller-than-expected tally that adds to evidence of a modestly softening labor market.
The report also noted that job changers saw pay gains moderate to 7.2%, while those staying in the same position had pay increases of 4.8%.
“With wage growth abating, the labor market is playing along with the Federal Reserve's effort to slow inflation,” said ADP's chief economist Nela Richardson. “If inflation goes back up, it won't be because of labor.
ADP job growth was weaker than expected at 122K. The usual caveat applies that it doesn't necessarily correlate with the nonfarm payroll figure. What is useful to see is that the overall trend of the past year is steady at low levels compared to post-pandemic trend. pic.twitter.com/3MP7KLPqx5
— Kathy Jones (@KathyJones) July 31, 2024
Updated at 7:40 AM EDT
Meet the new boss
Boeing (BA) shares jumped after the planemaker posted a wider-than-expected second-quarter loss that was offset by the naming of industry veteran Kelly Ortberg as its new CEO.
Ortberg, who recently ran Rockwell Collins, will succeed outgoing boss Dave Calhoun on Aug. 8. The world's second-largest aerospace group is looking to put its recent safety and production issues behind it following a one-year decline of more than 22% in the stock.
Boeing shares were last marked 2.22% higher in premarket trading at $191.02 each.
Stock Market Today:
Stronger-than-expected second-quarter earnings from chipmakers Advanced Micro Devices (AMD ) and Samsung, tied in part to surging AI investment demand, are driving gains for the semiconductor space heading into today's trading session, and offsetting the impact of a mixed set of fourth-quarter numbers from Microsoft (MSFT) .
Microsoft, the world's second-largest company, topped Wall Street forecasts for sales and profit but noted that its capital spending would continue to rise. It also reported modestly slower revenue growth from its Azure cloud division, suggesting that the hyperscalers may need more time to monetize their AI investments.
Related: Microsoft shares look to move lower
The larger market focus of the session, however, is likely to fall on the Fed's interest-rate decision, expected at 2 pm Eastern Time, as well as the regular news conference from Chairman Jerome Powell 30 minutes later.
Olivier Douliery/Bloomberg via Getty Images
No change is expected in the Federal Funds rate, which stands at a two-decade high of between 5.25% and 5.5%, but Powell is widely expected to signal at least one cut, and possibly more, starting in the early autumn.
Benchmark 10-year Treasury bond yields, which have fallen around 15 basis points since the Fed's most recent meeting in June, were last trading at 4.134% while 2-year notes were marked at 4.367%.
Related: Fed to signal timing of first interest rate cut as inflation slows
Overnight in Asia, the Bank of Japan raised its own benchmark lending rate for only the second time in 17 years, while unveiling plans to trim its monthly bond purchases as the central bank is slowly beginning to normalize policy following a years-long fight against deflation.
The Bank of England will also unveil its own interest-rate decision tomorrow in London, but traders aren't betting on any changes to the benchmark Bank Rate following a series of stronger-than-expected GDP growth figures.
Heading into the start of the trading day on Wall Street, futures contracts tied to S&P 500, which remains in negative territory for the month, are priced for a 53 -point gain to kick-off the session, with a 120-point boost for the Dow Jones Industrial Average.
The tech-focused Nasdaq, meanwhile, is called 280 points higher thanks in part to a 9% gain for AMD and a 5.6% lift for Nvidia (NVDA) .
Microsoft shares were marked 2.6% lower at $412.05 each while Meta Platforms (META) , which reports after the closing bell, edged 0.22% higher to $464.21 each.
Elsewhere, global oil prices jumped in overnight trading following news of the assassination of a senior Hamas leader, Ismail Haniyeh, who was killed during a visit to Iran.
Tehran has blamed the killing on Israel, which has yet to officially comment, while Supreme Leader Ayatollah Ali Khamenei has vowed "harsh punishment" in retaliation.
Brent crude futures contracts for September delivery, the global pricing benchmark, were last seen $1.72 higher on the session at $80.36 per barrel, while WTI contracts for the same month, which are tied to U.S. gas prices, rose $1.94 to $76.67 per barrel.
More Wall Street Analysts:
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In overseas markets, Europe's Stoxx 600 rose 0.95% in Frankfurt, while the FTSE 100 gained 1.41% in London.
Overnight in Asia, the Nikkei 225 ended 1.49% higher following the Bank of Japan rate increase, while the regional MSCI ex-Japan benchmark rose 1.2% into the close of trading.
Related: Veteran fund manager sees world of pain coming for stocks
