Wall Street’s main indexes rose on Thursday, lifted by the Federal Reserve’s signals of a September rate cut and a rosy sales forecast from Meta, although a pullback in chip stocks could keep gains in check.
Meta Platforms surged 7.9% after its second-quarter revenue beat and upbeat third-quarter sales forecast pointed to the possibility that its artificial intelligence costs would be covered, boosting the Communication Services sector by 2.0%.
“It’s very possible that Meta’s spending a little too much on AI, but they think AI is such an important trend, and for the next 15 years it’s going to be the place to be,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The Facebook-owner’s quarterly results were the first among “Magnificent Seven” companies to enthuse investors, allaying concerns around AI spending after dismal earnings from Alphabet and Microsoft last month.
Markets have been on tenterhooks, looking for signs that the tech behemoths can hold on to their bumper gains after steering Wall Street to record highs this year on AI euphoria and hopes of early rate cuts.
Most megacap stocks rose, with Apple and Amazon.com gaining 0.4% and 0.9%, respectively, ahead of their results after markets close. Tesla was down 2.3%.
AI trade favorite Nvidia rose 0.8%, a day after adding about $330 billion to its market value - a record one-day gain for any Wall Street company.
Chip stocks bolster Nasdaq, S&P 500 before Fed verdict
At 9:37 a.m. ET, the Dow Jones Industrial Average was up 245.31 points, or 0.60%, at 41,088.10, the S&P 500 was up 28.47 points, or 0.52%, at 5,550.77, and the Nasdaq Composite was up 53.82 points, or 0.31%, at 17,653.22.
The S&P 500 and the Nasdaq had their best day since Feb. 22 on Wednesday, after Fed Chair Jerome Powell offered the stock market a likely pivot to policy easing in September.
However, with prospects of rate cuts growing, investors are now trying to gauge if the central bank will be able to ease policy at a pace consistent with achieving the much awaited “soft landing” for the economy.
Data showed weekly jobless claims rose to 249,000, higher than the 236,000 that was expected - another sign of labor market weakness ahead of Friday’s Non-farm Payrolls reading.
The Russell 2000 small-cap index inched up 0.5% after logging its biggest monthly gain in July since the start of 2024, on hopes that mid- and small-cap companies will benefit from a low-interest-rate environment.
Moderna slumped 19.2% after cutting its 2024 sales forecast for COVID-19 and respiratory syncytial virus vaccines by up to 25%.
Eli Lilly rose 2.5% after trial results showed weight-loss drug Zepbound reduces the risk of hospitalization, death and other outcomes for obese adults with a common type of heart failure.
Arm Holdings slumped 8.3% after a conservative revenue forecast, while Qualcomm lost 5.1% on flagging a revenue hit after the U.S. revoked one of its export licenses for sanctioned Chinese telecom firm Huawei.
Advancing issues outnumbered decliners by a 2.04-to-1 ratio on the NYSE, and by a 1.19-to-1 ratio on the Nasdaq.
The S&P index recorded 27 new 52-week highs and no new lows, while the Nasdaq recorded 41 new highs and 30 new lows.
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