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US STOCKS-Wall St ends sharply higher after Fed rate hike, Powell comments

US STOCKS-Wall St ends sharply higher after Fed rate hike, Powell comments

Reuters · 07/27/2022 16:00
US STOCKS-Wall St ends sharply higher after Fed rate hike, Powell comments

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Microsoft, Alphabet results spark rally in megacap stocks

Fed announces rate hike in unanimous decision

Powell says does believe U.S. economy in recession right

Updates to close

By Caroline Valetkevitch

- U.S. stocks rallied on Wednesday, led by Nasdaq after the Federal Reserve raised its benchmark overnight interest rate by three-quarters of a percentage point and comments by Fed Chairman Jerome Powell reassured investors.

The added to gains from upbeat quarterly reports from Microsoft Corp and Alphabet Inc that lifted sentiment about the earnings season.

Powell said in a conference following the Fed announcement that he did believe the U.S. economy is currently in a recession but that it is softening.

He also said the lack of clear visibility into the future of the economy means the U.S. central bank can provide reliable guidance about where its policy is headed only on a "meeting-by-meeting" basis.

"The willingness of Powell to let data guide them going forward was something that pleased the market. He didn't automatically say we another rate hike," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

"It was a calming statement coming on the heels of a day where you saw some earnings and revenues that were better than expectations, albeit expectations that were very tempered."

The Fed action comes on top of a 75 basis points hike last month and smaller moves in May and March, in an effort by the Fed to cool inflation.

According to preliminary data, the S&P 500 .SPX gained 102.27 points, or 2.58%, to end at 4,023.32 points, while the Nasdaq Composite .IXIC gained 465.28 points, or 4.02%, to 12,027.86. The Dow Jones Industrial Average .DJI rose 432.05 points, or 1.37%, to 32,196.00.

Wednesday's hike was widely anticipated by investors.

"This was widely expected and encouraging that it was a unanimous decision," said Jack Ablin, chief investment officer and founding partner at Cresset Capital. "It was well telegraphed and properly balanced against expectations."

Microsoft MSFT forecast double-digit growth in revenue this fiscal year on demand for cloud computing services. Alphabet GOOGL reported better-than-expected sales of Google search ads, easing worries about a slowing ad market.

(Additional reporting by Shreyashi Sanyal, Sruthi Shankar and Aniruddha Ghosh in Bengaluru and Sinead Carew in New York; Editing by Sriraj Kalluvila, Anil D'Silva and Jonathan Oatis)