Home Finance Wall Street Soars with Optimism Ahead of Final Fed Rate Hike: Tech Giants and Top Stocks in Focus!

Wall Street Soars with Optimism Ahead of Final Fed Rate Hike: Tech Giants and Top Stocks in Focus!

by Editorial Desk
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Today’s stock market is showing signs of optimism as Wall Street rises ahead of the much-anticipated final Fed rate hike for the time being. The week ahead is filled with updates on interest rates and profits for some of the market’s most influential companies, and investors are keen to see where things are heading.

At midday trading, the S&P 500 is up by 0.5%, building on its impressive performance of eight winning weeks out of the last 10. The Dow Jones Industrial Average has also climbed 195 points, or 0.6%, reaching 35,423, while the Nasdaq composite is up by 0.2%. Becton Dickinson is leading the way with a significant 6.2% gain in the S&P 500 after announcing that its updated Alaris infusion system is back in full commercial operation following recalls. This comes after receiving clearance from the U.S. Food and Drug Administration for its system, which delivers medications and other products to patients.

Chevron is also making waves with a 2.6% rally as it reports stronger-than-expected profits for the spring. In the coming week, approximately 30% of S&P 500 companies will reveal their performance from April to June. Among them are three major players in the tech industry, Alphabet, Meta Platforms, and Microsoft. Their stock movements have a significant impact on the S&P 500, and their financial reports will be closely watched. These companies have already seen remarkable growth this year, each soaring by at least 35%, so strong numbers are needed to justify their impressive rallies.

The influence of these top stocks on the market has become so pronounced that Nasdaq has rebalanced its Nasdaq 100 index to reduce their impact. But even more crucial than the tech giants’ performance is what the Federal Reserve will announce on Wednesday during its latest meeting on interest rates.

Expectations are high that the Fed will raise its federal funds rate once again, reaching its highest level since 2001, as part of the effort to tackle inflation. Traders hope this will be the final increase in this cycle, considering that inflation has been cooling since last summer. High interest rates can have negative effects on the economy and asset prices, potentially leading to a recession. However, the economy has remained robust so far, partly due to a solid job market. A recent report suggests that the U.S. services industry is still growing, albeit at a slower pace than economists predicted. On a positive note, the preliminary report from S&P Global indicates that U.S. manufacturing isn’t performing as poorly as feared. Nonetheless, overall business activity in July seems to be growing at its slowest rate in five months.

Stocks have enjoyed a strong rally this year as investors hope for an economy that continues to grow while inflation remains in check. If the Fed manages a “soft landing” for the economy—avoiding overheating or a sharp slowdown—it would be seen as a positive outcome. However, achieving this delicate balance is no easy task, and there are potential risks associated with the rate hikes taking time to take full effect across the economy.

Another concern among strategists at BlackRock Investment Institute is that increased wages for workers may put pressure on corporate profits in the second half of the year.

Despite the overall optimism, some experts warn that stocks in the S&P 500 are looking expensive compared to historical levels. Doug Ramsey, the chief investment officer of The Leuthold Group, sees it as “another chance to buy high” following the market’s recovery from the 2020 COVID crash.

Meanwhile, in the bond market, the yield on the 10-year Treasury remains steady at 3.84%, influencing rates for mortgages and other significant loans.

In international markets, European stocks are mixed as data indicates weaker-than-expected performance in manufacturing and services industries across the continent. The European Central Bank is set to meet on interest rates later this week.

In Asia, indexes show a mixed performance with stocks dropping in Hong Kong and Shanghai, while Tokyo and Seoul are displaying stronger showings.

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