Stocks Soar On Earnings And Fed Announcement Image: Bigstock Stocks soared yesterday with the Dow up 1.37%, the S&P up 2.62%, and the Nasdaq up a whopping 4.06%. The markets were already trading higher in front of the FOMC Announcement on rates. Tuesday's after-the-bell earnings by Microsoft, Google, and Intel (amongst others) lifted stocks early yesterday. Even though Microsoft, for example, missed on both the top and bottom lines (although revenue was up 12% vs. last year), positive guidance turned sellers into buyers. Then came the Fed. They announced another 75 basis point rate hike. But stopped short of saying what they expected to do at their next meeting in September. While they hinted at getting the Fed Funds rate to between 3-3.5% (it's at a mid-point of 2.38% now), they said they will judge the economy at each meeting and make their decision at that time. They acknowledged that inflation remains too high, that spending and production have slowed, but that aggregate demand remains strong. When asked about a recession, Mr. Powell said he didn't believe we were in one by saying "there are too many areas of the economy that are performing too well." And that the "very strong labor market" is not consistent with recession. Of course, we'll find out this morning whether we're technically in a recession or not when Q2 GDP comes out. Estimates range from being down -1.2% to being up 0.5%. Either way, recession or not (what's in a name?), growth has slowed (which is actually good for tackling inflation). The question now is, what will growth be like in Q3 and the rest of the year? The Fed is still expecting positive growth for the full-year. And if so, the worst-case scenario that tanked stocks in the first half of the year, looks to be overdone. And that's why stocks are rallying. Since the June lows, the Dow is up 7.59%, the S&P is up 9.73%, and the Nasdaq is up 13.0%. The markets are still down double-digits. But are well off their worst levels. And that has many wondering if stocks have already hit bottom. To read more about whether we have or haven't, and what to do about it, be sure to read our latest commentary... Have Stocks Bottomed? Best, Kevin Matras Executive Vice President, Zacks Investment Research |
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