The stock market rallied after the Fed made its expected 25-basis-point rate hike Tuesday afternoon, and Chair Jerome Powell gave remarks that cheered investors.
Powell sounded less hawkish than he was previously, saying it was "gratifying" that disinflation is occurring without a major weakening of the labor market.
"The disinflationary process has started," he said, but inflation "remains too high." The Fed remains committed to bringing it back to 2%.
According to the Wall Street Journal, he pointed out the continued strength of the labor market, adding "We will stay the course until the job is done."
The 10-year Treasury note yield shed 13 basis points to 3.4%.
The Dow Jones Industrial Average rose less than 0.1% in uneven trading, and the S&P 500 climbed 1.1%. The Nasdaq rose 2%, while the small-cap Russell 2000 gained 1.5%. Indexes reversed higher after Powell gave initial comments.
Volume for both the NYSE and Nasdaq was higher vs. the same time on Tuesday, according to preliminary data.
The Dow held above its 50-day and 21-day exponential moving averages, while the S&P 500 traded above its 200-day moving average. The Nasdaq found support at its 200-day line, adding to a bullish trend seen in January.
The tech-heavy, Nasdaq 100-tracking Invesco QQQ Trust ETF added 2.1% in stock market action today.
Crude oil shed 2.4% to $76.98 per barrel. The Energy Select Sector SPDR ETF shaved off 2%.
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Fed Raises Rates 25 Basis Points, Sees More Hikes
The Fed announced it is raising rates by one quarter of a percent, as expected. The move put the fed funds rate at a 4.5%-4.75% range. The 25-basis-point move is smaller than the half-point increase in December and the four straight 75-basis-point increases in 2022.
Members acknowledged improving inflation numbers, but that didn't change their guidance significantly in a statement released after the meeting.
"The committee anticipates that ongoing increases" in interest rates "will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive," said the statement, using the same language included in policy statements since last March.
Markets anticipate another 25-basis-point hike in March, taking the fed fund rate to 4.75%-5%, then expect the Fed to pause and evaluate. The March move would put the rate near the Fed's targeted 5%-5.25% rate, where Fed officials feel they can take a break to let the economy absorb the moves.
But officials also said they would base their decisions on how the economy performs in the coming months.
Powell reiterated that inflation remains too high for comfort and that bringing it down will take considerably more time.
Labor Market Gets Mixed Signals
The January ADP employment report showed private payrolls increased only 106,000 vs. the 158,000 consensus, and considerably lower than December's robust, revised 253,000 jobs. The increase is the smallest in two years, according to Commonwealth Financial Network. The drop can be attributed to factors including seasonal layoffs and weather-affected jobs.
On the other hand, the December Job Openings and Labor Turnover (JOLTS) report came in at 11.012 million vs. the 10.2 million consensus.
The ISM manufacturing Index was 47.4 vs. the 48.0 expected, and a drop from December's 48.4. The drop shows further deterioration in the manufacturing sector. The index compiles and measures new orders, production, employment, supplier deliveries, and inventories from some 300 U.S. manufacturers.
Stock Market: AMD Pops, Atkore Gaps Up
Semiconductor company Advanced Micro Devices gapped up 12.6% in heavy volume, after reporting better-than expected Q4 EPS and sales numbers Tuesday after the market closed. The jump sent the stock over its 200-day line, where it found support. AMD was the S&P 500 leader today.
Electronic Arts plummeted 9.3% after the company reported a miss on December-quarter EPS but a beat on sales. The video game publisher announced it will delay its Star Wars game and stop development of two mobile games. The plunge sent the stock below its 50-day and 200-day lines.
Electrical products company Atkore gapped up 14.3% after reporting a beat on its fiscal Q1 top and bottom lines. Shares blew past a flat base with 128.46 buy point.
Western Digital pulled back 1.4% after the company reported a miss on December-quarter earnings but a beat on sales. It also gave lower-than-expected Q3 revenue guidance. Shares of the data storage device manufacturer found support at the 200-day moving average.
The parent company of Snapchat, Snap, plunged 10.3% after a 36% drop in Q4 earnings and a warning that current-quarter sales are likely to fall.
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Stock Market Movers: Shipping Stock Up Double-Digits
IBD 50 shipping stock Old Dominion Freight Line gapped up 10.3% in heavy volume after reporting a beat on Q4 EPS and a mild miss on sales. The stock closed with its largest increase since April 6, 2020, and was an S&P 500 leader today. ODFL's relative strength line hit a new high as indicated by the blue dot on the MarketSmith chart.
Medical equipment maker Stryker popped 9.9% in heavy volume after a report of better-than-expected Q4 adjusted EPS and sales late Tuesday.
Peloton spiked over 26.5% in heavy volume on a mixed fiscal Q2 2023 earnings report, and higher subscribers for the quarter. The interactive fitness equipment company gave upbeat comments.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
