U.S. stocks rose broadly Thursday as investors digested the Federal Reserve’s decision to raise interest rates and looked ahead to third-quarter earnings season next month.
Eight of 11 sectors in the S&P 500 climbed as stocks bounced back after turning lower in the final hour of Wednesday’s session. Some on Wall Street said the market was shaking off what they thought was a knee-jerk reaction following the Fed meeting.
“You really have to block out the noise in Washington,” said Janet Johnston, portfolio manager at TrimTabs Asset Management. “We think the third quarter is going to be stronger than analysts had expected. That’s been a pattern that we’ve seen for a few quarters.”
The S&P 500 rose 8.03 points, or 0.28%, snapping a four-session losing streak, led by the utilities and communications sectors. The Dow Jones Industrial Average added 54.65 points, or 0.21%, to 26439.93, while the technology-heavy Nasdaq Composite closed up 51.60 points, or 0.65%, to 8041.97.
Federal Reserve Board Chairman Jerome Powell testifies during a hearing before the Senate Banking, Housing and Urban Affairs Committee on July 17 on Capitol Hill. Photo: Alex Wong/Getty Images
The S&P 500’s new communications sector, which houses Google parent Alphabet, Facebook and Netflix , among other stocks, rose 0.8%, while the technology sector added 0.5%.
Tech-related stocks have helped power much of the gains in U.S. stocks this year, and some portfolio managers expect that to go on.
“Technology is one of the areas that we’ve seen a lot of growth, and the growth continues,” said Ms. Johnston.
Amazon shares rose $38.13, or 1.9%, to $2012.98. Apple climbed 4.53, or 2.1%, to 224.95, boosting the blue-chip index.
Major indexes had pulled back in recent sessions after hitting records late last week. Stocks tumbled Wednesday after the Fed said it would raise short-term interest rates by another quarter percentage point, and central-bank officials signaled they expect to lift them again later this year and through 2019.
A central question for investors is how Fed officials can balance the need to raise rates to keep the economy from overheating without hurting growth in the process. The U.S. economy has been growing at a fast pace this year and the unemployment rate has fallen to multiyear lows.
Companies in the S&P 500 are expected to report another period of robust profits in the third quarter. FactSet is projecting a 19% increase in earnings, a slight slowdown from the 25% growth posted in the first and second quarters.
“The economic fundamentals continue to be strong,” said Guy Miller, chief market strategist at Zurich Insurance Group. But “the pace of U.S. growth will slow with the Fed moves, higher oil prices and waning effect of tax cuts.”
“This has an impact for the rest of the world, too,” he said.
International trade frictions continued to be a focus for money managers after U.S. President Trumpaccused China of trying to interfere in the forthcoming midterm elections. The two economies have been embroiled in a trade spat this year—both sides have introduced tariffs—and concern is growing about its impact on the global economy. The Trump administration is also stepping up pressure on Canada.
Elsewhere, the 10-year U.S. Treasury yield fell to 3.054% from 3.059% Wednesday. Yields move inversely to prices.
Overseas, the Stoxx Europe 600 added 0.3%, erasing earlier losses after being dragged down by Italian and Spanish stocks, as investors awaited budget developments in Italy. Asian markets mostly fell, with Japan’s Nikkei Stock Average shedding 1%, while Hong Kong’s Hang Seng slipped 0.4%.
Write to Georgi Kantchev at [email protected]