The Fed is optimistic about investors
The Fed fuels hopes for an imminent interest rate cut, which is well-received on Wall Street. The earnings season continues to keep investors on their toes. Especially the stocks of an online dating provider are seeing strong trading. The semiconductor sector is also on the rise again.
A relief rally in the chip sector has brightened the mood on Wall Street. Additionally, the positive mood persisted following indications from Fed Chairman Jerome Powell that the interest rate hike is approaching. The Dow Jones Industrial Average of blue-chip stocks closed on Wednesday 0.2 percent higher at 40,842 points. The broader S&P 500 advanced 1.6 percent to 5,522 points, and the tech-heavy Nasdaq Composite rose 2.6 percent to 17,599 points.
The latest financial report from U.S. semiconductor manufacturer AMD was a source of joy for investors. "The results pleased investors more than Microsoft's disappointed," said Sam Stovall, chief strategist at CFRA Research. AMD's stock climbed 4.4 percent, while Nvidia gained 12.9 percent.
In late trading, monetary policy was also in focus. The guardians of the currency around Federal Reserve Chairman Jerome Powell left the key interest rate in the range of 5.25 to 5.50 percent. However, given the progress in the fight against inflation, the Fed is paving the way for a rate hike. The central bank pointed to progress towards its inflation target of 2 percent. Powell stressed before the press that under certain conditions, a rate cut could already be on the table at the next meeting in September.
The latest data on the U.S. labor market has already shown the desired direction from the Fed's perspective. According to a survey, U.S. companies created fewer jobs in July than expected by experts. The central bankers around Fed Chairman Jerome Powell are fighting inflation with a tight monetary policy, also aiming to cool the labor market.
Earnings season in full swing
Outside the tech sector, corporate earnings reports and forecasts were also in focus among individual stocks. Strong numbers were particularly sought after by Match, the parent company of Tinder, which surged around 13 percent. The provider of online dating services' revenue in the second quarter exceeded analyst expectations. The reason was a lower decline in paying users than in the previous quarter. Companies like Match and its smaller rival Bumble are struggling with weaker profits since the popularity of dating apps has declined after the end of the corona pandemic.
Investors also snapped up Mastercard. The stock of the credit card provider rose 3.6 percent. Despite high interest and inflation rates, consumers are still spending relatively freely, Mastercard reported. This is a relief for investors after the weak quarterly report from rival Visa, says Logan Purk, analyst at U.S. financial services firm Edward Jones. Especially the tense U.S. labor market seems to have provided many customers with greater job security, allowing them to shop without restrictions.
The quarterly report from U.S. health insurer Humana, on the other hand, left investors cautious. The stock fell 10.6 percent, with rivals CVS, UnitedHealth, Elevance, and Cigna also losing ground. While Humana's earnings exceeded analyst expectations in the quarter, the company warned of unexpectedly high utilization of medical services. Whether this is a longer-term trend remains to be seen.
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The positive performance of tech stocks, such as AMD and Nvidia, has contributed to the overall improvement of the economy. The strong earnings report from AMD pleased investors, leading to a 4.4% increase in its stock price.
Despite solid corporate earnings in various sectors, caution was expressed by investors regarding the U.S. health insurer Humana, whose stock fell 10.6% following its quarterly report due to unexpectedly high utilization of medical services.
