Nasdaq Jumps 4% After Fed Rate Hike

Barry Adams
27 Jul, 2022
New York City

Stocks rallied on Wall Street after the Federal Reserve increased the key lending rate by a larger-than-expected amount. 

The 75 basis points increase was welcomed by investors and reaffirmed the Fed's commitment in fighting inflation. 

After the increase, the federal funds rate have a target rate range between 2.25% and 2.5%. 

"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run" and "anticipates that ongoing increases in the target range will be appropriate. 

In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities," noted the accompanying statement released by the Federal Reserve. 

Investors are anticipating a better read on the second quarter GDP before the market opens on Wednesday after the first quarter GDP declined at an annual rate of 1.6%. 

The S&P 500 index increased 2.6% to 4,023.61 and the Nasdaq Composite index gained 4.1% to 12,032.42.  

Futures of crude oil rose $3.11 to $98.11 a barrel and natural gas fell 32 cents to $8.66 a thermal unit but still hovered near the price last seen in 2008. 

The yield on 10-year Treasury notes declined to 2.78% and on2-year notes fell to 2.98%. 

The broad rally lifted stocks across all sectors led by a surge in tech stocks.

Investors also reacted to the latest batch of earnings releases. 

Microsoft gained 6.7% to $268.40 after the company exceeded lowered earnings expectations.

Microsoft said quarterly net income growth slowed after cloud business growth slowed and video game business shrank. 

June quarter sales increased 12% to $51.9 billion and rose in constant currencies 16% from a year ago. 

Net income jumped 2% or 7% in constant currencies to $16.7 billion from a year ago. 

Diluted earnings per share rose 3% to $2.23 from $2.17 a year ago. 

For the full-year net revenues rose 18% to $198.3 billion, net income surged 19% to $72.7 billion and earnings per share rose 20% to $9.65. 

Alphabet Inc jumped 7.7% to $113.05 after the parent of Google reported a decline in earnings but were ahead of the expectations set by some investors. 

Alphabet reported its slowest quarterly revenues increase in two years as rising dollar and weakening economic backdrop impacted advertising environment. 

Alphabet Inc said second quarter revenues increased 13% or 16% in constant currencies to $69.7 billion. 

Net income fell to $16.0 billion from $18.5 billion and diluted earnings per share fell to $1.21 from $1.36 a year ago. 

Chipotle Mexican Grill, Inc soared 12.7% $1.510.08 after the operator of fast food restaurants was able to increase customer price faster than the increase in food prices and wage costs. 

PayPal Holdings Inc increased 12.2% to $86.47 after the activist investor Elliott Management acquired a stake in the payment processor. The news was first reported by the Wall Street Journal. 

Shopify Inc increased 11.7% to $35.24 despite the e-commerce platform operator reporting wider-than-expected loss and said losses in the current quarter are expected to rise. 

Boeing Co declined 0.11% to $156.09 after the aerospace and defense contractor reported lower-than-expected revenues and wider-than-expected quarterly loss. 

However, the company did not revise its production schedule for 737 MAX jets. 

 Hilton Hotels rose 7.5% to $129.25 after the hotel operator lifted its annual outlook citing a rebound in travel demand. The company also delivered better-than-expected quarterly results. 

McDonald's Corp gained 0.7% to $258.89 after the fast food chain reported stronger-than-expected earnings. 

Global comparable store sales increased 9.7% driven by the U.S. sales increase of 3.7% and systemwide sales increased 4.0% or 10.0% in constant currencies. 

Consolidated revenues declined 3% to $5.7 billion and net income plunged 46% to $1.2 billion and diluted earnings per share fell by the same amount to $1.60 from a year ago.