Stocks are climbing on Thursday after prominent firms reported higher-than-expected profit reports and the latest signs that the economy is defying fears of a recession.
In morning trade, the S&P 500 was 0.6% higher after reaching its highest level in nearly 16 months. As of 10:30 a.m. Eastern time, the Dow Jones Industrial Average was up 72 points, or 0.2%, at 35,592, on course for its 14th straight rise. Meanwhile, the Nasdaq composite was leading the market with a 0.9% increase following Meta Platforms’ good profit announcement.
Earnings for Meta, which owns Instagram and WhatsApp in addition to Facebook, increased more than analysts expected as its services attracted more active customers. Because of its vast size, Meta is one of Wall Street’s most significant stocks, and it surged 6.9%.
McDonald’s was helping to support the Dow after easily outperforming analysts’ profit projections in the spring. Its global sales increased, and its shares increased 1.9%.
Treasury yields were climbing in the bond market after a series of data indicated that the economy is in better shape than projected.
According to one estimate, the entire economy’s growth quickened in the spring. This greatly outperformed economists’ expectations of a downturn from the first three months of the year. This data also revealed that the gauge of inflation was not as high as projected from April to June.
Meanwhile, according to other data, fewer workers claimed unemployment benefits last week. It’s the latest sign that the labor market is holding up exceptionally well, while another survey showed that orders for long-lasting manufactured items increased more than expected last month.
All of the statistics contributed to Wall Street’s optimism that the economy will continue to defy predictions of a recession despite significantly higher interest rates.
The Federal Reserve hiked its federal funds rate to its highest level in more than two decades on Wednesday, hoping to push inflation down. High-interest rates work by brutally slowing the overall economy and harming stock and other investment prices. After skyrocketing from near-zero levels early last year, the abrupt increase in interest rates has investors on high alert for a possible recession.
Fed Chair Jerome Powell, on the other hand, stated on Wednesday that any further rate hikes will be contingent on what future inflation and economic data show. This boosted traders’ anticipation that Wednesday’s hike was the final one in this cycle.
Higher interest rates are seen as hitting technology and other high-growth industries in particular, which is why Big Tech stocks helped to lead the market on Thursday despite Meta’s hefty profit report.
Hopes for a pause to rate hikes are increasing wagers on the Fed pulling off a “soft landing” for the economy, in which rising inflation can be brought down to the Fed’s aim without creating a harsh recession.
Such expectations have helped propel equities higher this year, but skeptics argue that the market has gone too far, too fast. While inflation has declined since its peak last summer, it remains high, and the Fed’s mission may be far from over. They believe a recession will yet occur.
However, markets appeared to be ruled by optimism on Thursday.
European stocks rose as well as the European Central Bank boosted interest rates. The French CAC 40 gained 2.1%, while Germany’s DAX gained 1.6%.
Asian market indices were mainly higher, headed by Hong Kong’s Hang Seng, which rose 1.4%.
In the bond market, the 10-year Treasury yield increased to 3.94% from 3.87% late Wednesday. It aids in the determination of mortgage and other critical lending rates.
The two-year Treasury yield, which is more sensitive to Fed predictions, increased to 4.91% from 4.85%.
Featured Image: Unsplash @ bylolo
