US stocks rose as Microsoft’s (MSFT) and Alphabet’s (GOOG, GOOGL) results reassured investors the outlook for the tech sector is not bad as anticipated, and a widely expected 75 basis-point increase in interest rates later Wednesday afternoon should show an unrelenting regulatory focus on controlling inflation.
The Dow Jones Industrial Average rose 0.2% to 31,838.7 after midday on Wednesday. The S&P 500 climbed 1.3% to 3,972.5, and the Nasdaq Composite was 2.5% higher at 11,851.2.
Communication services, technology and consumer discretionary, homes to some of the fastest-growing firms in the world, led the sector gainers. Defensive areas of the market — utilities, health care and consumer staples — were among the laggards.
The US 10-year yield fell 3.8 basis points to 2.77% intraday.
Microsoft expects continued double-digit revenue growth in the fiscal year ahead based on momentum and market share gains in its portfolio, mitigating the impact of dollar strength on its short-term outlook following a fourth-quarter miss. Shares jumped 4.9% intraday, the top performer on the Dow.
Alphabet’s shares jumped 6.7% intraday, among the biggest gainers on the Nasdaq, after the company reported revenue for the quarter ended June 30 rose to $69.69 billion from $61.88 billion a year earlier, only a touch shy of the analysts’ estimate of $69.8 billion.
The Federal Reserve is to announce its policy decision for July at 2 pm ET. The probability of a 75 basis-point increase in interest rates is more than 76%, according to the CME FedWatch Tool. The likelihood of a 100 basis-point jump is just under 24%, implying what some would interpret as a soft approach to tackling inflation with a 50 basis-point increase is not even on the table.
“Federal Reserve Chairman Jerome Powell’s comments regarding the current state of the economy will largely dictate investors’ expectations for September’s policy decision,” Stifel Chief Economist Lindsey Piegza said in a research note Wednesday. “Comments focused on the domestic economy’s loss of momentum would seemingly be a precursor for a less aggressive, 50 basis-point hike come Sept. 21.”
Mortgage applications slumped to their lowest point of activity since February 2000. The market composite index, which measures loan applications, slipped 1.8% for the week ended July 22 on a seasonally adjusted basis, narrowing from a 6.3% drop in the previous week, the Mortgage Bankers Association said Wednesday.
West Texas Intermediate futures jumped 2.5% to $97.31 a barrel.
Gold was up 0.1% to $1,720.90 per troy ounce, and silver was up 0.4% to $18.61 per ounce.