THE GIST (“THE WHAT”)
Inching higher, the S&P 500 index registered a fifteen and a half month high led by mega-cap tech stocks ahead of big tech earnings. Stronger-than-expected U.S. July consumer confidence further bolstered equities, raising the odds of a soft landing of the economy. Gains, however, were limited ahead of Fed’s policy decision tomorrow. The index closed the session at 4567.46, up 12.82 points (0.28%).
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THE DETAILS (The “How & Why”):
Technology sector led the broader index higher amid AI optimism ahead of earnings release by Microsoft and Alphabet. Investors broadly expect these mega-cap stocks to offset a slowdown in cloud business with the help of new AI-based products.
Chip stocks also traded higher for the day. F5 Inc was the best performer within the tech space, jumping 5.84% after the cloud security company topped earnings expectations. Materials stocks were other strong performers following reports that Chinese government has vowed to support its ailing property sector, pushing metal prices higher.
U.S. July consumer confidence rose to its highest level since July 2021 as labor market holds strong despite rising interest rates and recessionary concerns. In World Economic Outlook, the International Monetary Fund (IMF) raised its global 2023 GDP forecast to 3.0%. Treasury yields moved higher as investors keenly await the Fed’s policy decision. The 10-year Treasury yield climbed to a one and half high of 3.920% and settled at 3.902%, higher by 2.9 basis points. While a 25-basis point hike is broadly expected, investors will be closely looking guidance from the Fed regarding its future monetary policy roadmap.
Packaging Corp was the best performer within the index, soaring 10.1% on beating earnings estimates. MSCI Inc and GE were other strong gainers on the back for earnings beat, jumping higher by 9% and 6.3%, respectively.
On the other hand, Raytheon Technologies lead the losers, tumbling 10.2% in its worst day in nearly 3 years after the aerospace and defense company announced its plan to shed some of its jet engines from service for inspection. Airline stocks were other major decliners of the session, led by 9.7% decline in Alaska Air Group after warning that the falling domestic demand and airfares could dent its third quarter results.