Updated at 11:23 am EST
U.S. stocks nudged higher Wednesday, potentially extending the strongest three-day rally on Wall Street in two years, powered by better-than-expected tech sector earnings and fading bets of a big rate increase from the Federal Reserve.
Google’s (GOOGL) – Get Alphabet Inc. Class A Report blowout fourth quarter profits after the close of trading last night, alongside plans to split its 3,000 stock down to around $150 a share, coupled with a robust chip sector outlook from Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report looks set to rip tech stocks higher Wednesday, clawing back losses from the sector’s worst January performance in more than a decade.
Stocks are also getting help from fading bets on a 50 basis point rate hike from the Fed next month, with the CME Group’s FedWatch tool indicating a 90.5% chance of a 25 basis point move as more data suggests a modest slowing of the U.S. economy’s post-pandemic recovery.
Still, faster-than-expected inflation figures from Europe today, showing the region’s estimate of harmonized consumer prices rose 5.1% last month — the fastest on record — is a reminder that the ‘transitory’ narrative is no longer in place, and quicker U.S. readings could alter the Fed’s policy tract in the months ahead.
Oil prices are also trading near seven-year highs again Wednesday ahead of a key meeting of OPEC leaders in Vienna, where the cartel and its allies, including Russia, are likely to stick to plans that will only add small increases to their output in the months ahead.
Brent crude contracts for April delivery, the global pricing benchmark, were last seen 39 cents higher on the session at $89.54 per barrel.
On Wall Street, the Dow Jones Industrial Average booked a modest 38 point mid-morning dip while the S&P 500 gained 8 points.
Google, AMD and Nvidia (NVDA) – Get NVIDIA Corporation Report gave the Nasdaq Composite an early boost, but the tech-focused benchmark fell 55 points by mid-morning even as benchmark 10-year note yields ease to 1.764%.
Google shares, in fact, opened at an all-time high after the ad sales and tech giant blasted Wall Street earnings forecasts and planned a 20-for-1 split of its $3,000 stock.
Google also said it has approved a 20-for-1 stock split, following similar moves by Apple (AAPL) – Get Apple Inc. Report and Tesla (TSLA) – Get Tesla Inc Report over the past two years, that would give each investor a special ‘one-time’ dividend of 19 shares for each of its Google holdings. CFO Ruth Porat said the decision was aimed a “making our shares more accessible.”
AMD shares, meanwhile, soared more than 10% after the chipmaker posted record fourth quarter earnings and issued a bullish sector forecast for the coming year.
PayPal (PYPL) – Get PayPal Holdings, Inc. Report, however, plunged 22% after the group cautioned that Ebay’s (EBAY) – Get eBay Inc. Report decision to go with an in-house system payments system would carve more than $600 million from its near-term revenue forecast.
PayPal’s 2022 forecasts were also affected by a strategy shift that will focus on customer engagement over account growth, a move that could improve margins by concentrating on higher-end users but is likely to result in much slower-than-expected net new account growth.
Starbucks (SBUX) – Get Starbucks Corporation Report shares were also on the back foot, falling more than 3% after the world’s biggest coffee chain posted softer-than-expected December quarter earnings as input costs and store closures eroded its bottom line.
In overseas markets, the searing back of January inflation in the eurozone has added pressure to European Central Bank rate bets, with a March move now likely, but hasn’t yet hit regional stocks, which were marked 0.65% higher in mid-day trading in Frankfurt.
Overnight in Asia, the region-wide MSCI ex-Japan index jumped 0.42% as China stocks remained closed for Spring Festival and New Year Celebrations while stronger-than-expected earnings from Sony helped the Nikkei 225 close 1.68% higher in Tokyo at 27,533.60 points.
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