Fed's steady rates boost stocks; Nvidia leads tech rally as economic indicators show mixed signals
Stocks surged on Wednesday after the Federal Reserve kept interest rates unchanged and highlighted progress against inflation, according to CNBC.
Traders flocked back to megacap tech stocks, especially those in the chip sector.
The S&P 500 rose 1.58 percent to close at 5,522.30, and the Nasdaq Composite jumped 2.64 percent to 17,599.40, marking the best session since February for both indexes. The Dow Jones Industrial Average increased by 99.46 points, or 0.24 percent, ending at 40,842.79.
Earlier in the session, the Dow had risen by as much as 455.30 points, or 1.1 percent, while the S&P 500 and Nasdaq had climbed 2.1 percent and 3.2 percent, respectively, before slightly pulling back.
During his press conference, Fed Chair Jerome Powell indicated that the central bank could consider a rate cut if inflation continues to slow. “If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September,” Powell said.
The Federal Open Market Committee expressed a slightly more optimistic view in its post-meeting statement, noting progress in reducing inflation closer to the 2 percent target.
LPL chief economist Jeffrey Roach noted, “The Fed used today’s statement to prepare markets for upcoming rate cuts. As inflation rates improve and unemployment increases, the Fed can cut rates yet keep the nominal funds rate above the inflation rate.”
Roach added that markets would likely respond favourably to this shift in tone.
Earlier on Wednesday, jobs data hinted at a slowing economy, supporting the Fed's efforts to reduce inflation. The latest ADP report indicated that private job growth slowed in July, with wage gains falling to a three-year low.
Megacap tech stocks rebounded during the trading session. Nvidia shares surged 12.8 percent, recovering some of the month’s losses and marking its best day since February 22. Optimism in the semiconductor sector grew after Advanced Micro Devices reported better-than-expected results.
Other tech giants such as Apple, Meta Platforms, and Amazon also saw their stock prices rise, although Microsoft dropped by more than 1 percent due to disappointing quarterly cloud revenue.
Boeing shares increased by 2 percent after announcing a new CEO and reporting a larger-than-expected loss and disappointing revenue for the second quarter. In contrast, Humana shares fell 10.6 percent after issuing weak guidance.
Despite the tech sector's revival on Wednesday, the Nasdaq Composite ended July down by about 0.8 percent. The S&P 500 gained 1.1 percent for the month, while the Dow saw a 4.4 percent increase, marking its best month since December as investors rotated into cyclical sectors of the market.
