NEW YORK: The tech-heavy Nasdaq advanced on Wednesday as strong results from Microsoft and Alphabet offset concerns over rising interest rates and their effect on the US economy.
Microsoft Corp climbed 8.1 following upbeat quarterly results and on robust artificial intelligence product sales, while Alphabet Inc inched up 0.5% on a $70-billion share buyback plan and better-than-expected first-quarter report.
Tracking a strong performance in Microsoft’s cloud segment, firms including Amazon.com, data analytics company Datadog, and data cloud giant Snowflake Inc advanced between 3.6% and 8.9%.
Earnings forecasts have improved, with analysts expecting a 3.2% contraction in first-quarter profit for S&P 500 companies compared with a 5.2% decline estimated at the start of the earnings season.
Of the 163 S&P 500 companies that reported first-quarter profit through Wednesday, 79.8% topped analysts’ expectations, as per Refinitiv IBES data. In a typical quarter, 66% companies beat estimates.
“There had been a greater concern that the economy was going to slow down to a more significant extent and so far first-quarter earnings are bucking that trend and looking much stronger than anticipated,” said Greg Bassuk, chief executive at AXS Investments.
Meanwhile, First Republic Bank’s shares hit another record low after a report said the US government was unwilling to engineer its rescue, after the lender reported plunging deposits earlier this week.
PacWest Bancorp gained 14.2% as the regional lender beat estimates for first-quarter profit and managed to stabilize deposit outflows.
The S&P 600 regional banks sub index advanced 1%.
Meta Platforms Inc is scheduled to report results after market close on Wednesday.
At 11:54 a.m. ET, the Dow Jones Industrial Average was down 2.12 points, or 0.01%, at 33,528.71 the S&P 500 was up 12.33 points, or 0.30%, at 4,083.96 The Nasdaq Composite index rose 1.23%, or 147.93, at 11,947.09, as per Nasdaq.com.
Investors are keenly awaiting the Federal Reserve’s monetary policy decision on May 3 for clues on how far policymakers will hike interest rates.
Traders have priced in a 79% chance of the US central bank hiking rates by 25 basis points next week, as per CMEGroup’s Fedwatch tool, with most expecting the Fed to hold rates before starting to cut them later this year.
Reflecting mounting anxiety among investors, the cost of insuring exposure to US sovereign debt rose to its highest since 2011, driven up by unease that the government could hit its debt ceiling sooner than expected.
The US House of Representatives could vote as early as Wednesday on a bill that sharply cuts spending for a decade in exchange for a short-term hike in the debt ceiling, though it was unclear if it had enough support in the Republican majority to pass.
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