Tech stocks rallied Wednesday following the Federal Reserve’s latest interest rate increase after Fed Chair Jerome Powell suggested signs of “disinflation” are building in the economy.
When the closing bell rang on Wall Street, the technology-heavy Nasdaq Composite (^IXIC) was higher by 2%, leading the charge higher for markets following Powell’s comments.
The S&P 500 (^GSPC) closer higher by 1%, while the Dow Jones Industrial Average (^DJI) rose 0.03%, or just 8 points. The Dow was weighed down by energy stocks, which remained under pressure Wednesday as the price of WTI crude oil fell 3% to around $76.50 per barrel.
On Wednesday afternoon, the Federal Reserve announced its latest interest rate increase, a move that brought the Fed’s benchmark policy rate to the highest level since October 2007. The Fed’s move represented its smallest increase in nearly a year.
In its statement, the Fed noted inflation pressures are moderating but said inflation “remains elevated” as price pressures prove persistent across the economy. But in his press conference, Powell said that “for the first time,” the Fed could say the “disinflationary process has started.”
Investors took Powell’s comments as a sign the Fed could be closer to pausing its current rate hiking campaign. A pause in interest rate increases is seen by investors as a positive sign for riskier assets like tech stocks, as detailed by Yahoo Finance’s Julie Hyman earlier this week.
Wednesday’s rally was punctuated by Peloton (PTON), which saw shares rise 26% following news out Wednesday morning the company decreased its cash burn to $94 million in its latest quarter, down from $747 million nine months ago. On an adjusted basis, the company reported $8 million in free cash flow during the holiday quarter.
“If you’ve been wondering whether or not Peloton can make an epic comeback, this quarter’s results show the changes we’re making are working,” CEO Barry McCarthy wrote in a letter to shareholders.
A pandemic darling, Peloton was joined by Cathie Wood’s flagship ARK Innovation ETF (ARKK), which rose 4% on Wednesday, in enjoying a Fed-induced bump.
These gains continued the market action that has predominated this year, as stocks capped off a strong start to the year on Tuesday, with the S&P 500 logging its best January since 2019 while the Nasdaq 100 enjoyed its strongest January rally since 2001, gaining over 10%.
With earnings season in full flight, however, the news wasn’t all good on Wednesday, with another disappointing quarter from Snap (SNAP) out Tuesday night garnering the most investor attention.
Shares of the social media company fell 10% after the company told investors its internal forecasts assume revenue in its current quarter will fall between 10% and 2% from a year ago.
Match Group (MTCH) and Electronic Arts (EA) shares were also …….
