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Big Tech Earnings Send Ripples Through S&P 500 and Nasdaq

A wave of mixed reactions in the stock market has been triggered by the latest Big Tech earnings, all eyes are on the impending Federal Reserve rate hike decision.


Mixed Impact of Tech Giants' Earnings on Stock Market Indices

The S&P 500 and the Nasdaq experienced a slight downturn on Wednesday, as investors tried to make sense of the mixed earnings from tech behemoths Microsoft and Alphabet. This comes in anticipation of a potential Federal Reserve rate hike that could escalate borrowing costs to levels not seen since the global financial crisis.

Microsoft and Alphabet's Contrasting Financial Performances

Microsoft's stock dropped by 4.0% following its revelation of an aggressive spending plan designed to satisfy the increasing demand for its latest AI-powered services. Despite this, Microsoft managed to exceed quarterly revenue and profit estimates. In contrast, Alphabet's stock saw a 6.1% gain after Google's parent company reported second-quarter profit that surpassed Wall Street's predictions due to sustained demand for its cloud services and a resurgence in advertising.

Market Reactions Reflect Selectivity in Big Tech

The NYSE FANG+ index, containing many mega-cap growth stocks, fell by 1.1% despite a substantial 74.6% rally so far this year spurred by AI optimism and speculation that the Fed's rate hiking cycle is nearing its end. As David Bahnsen, Chief Investment Officer of the Bahnsen Group, pointed out, "We are now seeing selectivity in big tech stock prices following their surge this year."

Notable Stock Movements: Meta Platforms and Alibaba Collaboration

Meta Platforms enjoyed a 0.4% increase after Alibaba's cloud unit announced its support for Meta's open-source AI model, Llama. Further, Meta's quarterly results are highly anticipated later in the day.

Investor Watch: Federal Reserve's Looming Interest Rate Hike

Investors are keenly awaiting the Federal Reserve's probable 25-basis point interest rate hike, with less certainty about the central bank's subsequent actions. "If corporate earnings in consumer-related sectors fall, it could alter the Fed's tone," cautioned Melissa Brown, Managing Director of Applied Research at Qontigo.

S&P 500 Companies Show Strong Earnings Performance

By Wednesday, 77.6% of the 152 companies listed on the S&P 500, which had announced their earnings, had beaten analyst expectations, as per Refinitiv Data.

Significant Movers: Dow Jones, Boeing, Snap, Union Pacific, Wells Fargo

As of 11:42 a.m. ET, the Dow Jones Industrial Average had risen marginally, buoyed by a 6.2% gain in Boeing following a smaller-than-expected quarterly loss and a spike in cash flows. In contrast, Snap saw a 19.3% drop after its weaker-than-expected third-quarter forecast due to fierce competition for advertising dollars. Elsewhere, Union Pacific surged 10.0% after announcing Jim Vena as its new CEO, succeeding Lance Fritz, while Wells Fargo climbed 1.8% after the bank's board approved a new share buyback program of up to $30 billion.

In the latest market trends, advancing issues outpaced declining ones with a 1.50-to-1 ratio on the NYSE and a 1.32-to-1 ratio on the Nasdaq. The S&P index notched 24 new 52-week highs, with the Nasdaq recording 58 new highs and 64 new lows.