The results of Microsoft Corp (MSFT.O) and Alphabet Inc (GOOGL.O) spurred a relief rally in heavyweight technology and growth shares on Wednesday, as investors voiced confidence in Big Tech’s capacity to navigate a recession.
For the past decade, high-growth and mega-cap businesses have propelled the US stock market, but rising interest rates to combat decades-high inflation and a recent dramatic surge in the currency have weighed on the market.
Rate-sensitive growth stocks (.RLG) plunged 25% this year as the Federal Reserve began tightening monetary policy, compared to a near 18% drop in the S&P 500 index.
The Fed’s anticipated interest rate decision later on Wednesday will be critical for the rate-sensitive group. The Fed is likely to hike interest rates by 75 basis points.
Alphabet shares jumped 4.5 percent after the firm reported higher-than-expected Google ad sales. At the same time, Microsoft shares rose 3.1 percent after the company indicated it expects double-digit revenue growth in fiscal 2018.
“The guidance was pretty good and that helped the market know that the landscape is definitely slowing but at the end of the day, good companies are going to navigate it well,” said Burt White, chief strategy officer at Carson Group.
“The market has rebounded and is now looking for leadership from some of the big tech names.”
After dismal earnings from Snapchat’s owner Snap Inc (SNAP.N) last week caused a selloff in social media and ad tech firms, Facebook owner Meta Platforms (META.O) will now focus on ad income. more info.
Meta shares increased by 2.7 percent, while Apple Inc (AAPL.O) and Amazon.com Inc (AMZN.O), scheduled to report earnings on Thursday, increased by 2.5 percent and 0.5 percent, respectively.
That would imply that the results of the major US companies – Apple, Microsoft, Alphabet, and Amazon – account for about a quarter of the weight in the benchmark S& P 500 index (.SPX).
