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S&P 500, Dow come out of tech gloom on hopes of slower rate hikes

The S&P 500 and the Dow edged higher by afternoon trading on Wednesday on renewed bets of a slowdown in the pace of interest rate hikes, while the Nasdaq remained under pressure from downbeat results and warnings from Microsoft and Alphabet.


The benchmark 10-year Treasury yield fell to one-week lows as expectations of slower rate hikes gained after the Bank of Canada delivered a smaller-than-expected 50 basis point increase.


Such hopes also come against the backdrop of economic indicators and corporate results suggesting that rapid increases to the borrowing cost is slowing the economic growth.


“The Fed narrative has been in the market since Friday,” said Art Hogan, chief market strategist at B. Riley Wealth in New York, noting that the BoC decision supported a pullback in Treasury yields.


Wall Street’s main indexes have notched three straight sessions of gains on hopes of less-hawkish Federal Reserve even as the central bank is expected to deliver its fourth 75 basis-point hike in its Nov. 1-2 policy meeting.


Bets for a 50 basis point hike in December have increased to 55.3%, up from 47.4% a day ago, while the expectations for a 75 basis point hike have shrunk to 38.6% from 50.8%, according to CME’s FedWatch tool.


A drop in new U.S homes sales in September provided further proof of economic weakness and added to a raft of recent reports that indicated shrinking business activity and souring consumer confidence.


The Nasdaq index (.IXIC) was weighed down by Microsoft Corp (MSFT.O), which tumbled 5.8% as it posted its lowest sales growth in five years and forecast second-quarter revenue below Wall Street estimates.


Alphabet Inc (GOOGL.O) fell 6.5% after reporting downbeat ad sales and warned of a slowdown in advertising spending by businesses.


“Disappointing earnings from large technology companies has been a company-specific and not a market specific issue. And at the same time... a couple of days in a row of yields pulling back seems to be more important in terms of a tailwind than the Microsoft and Alphabet misses,” Hogan said.


Shares of ad revenue dependent social media firms Meta Platforms (META.O) fell 2.6%, while Pinterest (PINS.N) dropped 1.4%.


Analysts have set the bar low for third-quarter reporting season, with aggregate S&P 500 profit growth now seen at 2.3% year-on-year, half of what it was at the start of the month, according to Refinitiv data.


At 12:05 p.m. ET the Dow Jones Industrial Average (.DJI) was up 289.55 points, or 0.91%, at 32,126.29, the S&P 500 (.SPX) was up 19.78 points, or 0.51%, at 3,878.89 and the Nasdaq Composite (.IXIC) was down 27.42 points, or 0.24%, at 11,171.70.


Visa Inc (V.N) jumped 5.2%, boosting the Dow, after the payments processor topped quarterly profit estimates on strong travel demand.


Advancing issues outnumbered decliners by a 4.87-to-1 ratio on the NYSE and by a 3.43-to-1 ratio on the Nasdaq.


The S&P index recorded 23 new 52-week highs and two new lows, while the Nasdaq recorded 73 new highs and 41 new lows.


Wall Street’s main indexes have notched three straight sessions of gains on hopes of less-hawkish Federal Reserve even as the central bank is expected to deliver its fourth 75 basis-point hike in its Nov. 1-2 policy meeting.


Bets for a 50 basis point hike in December have increased to 55.3%, up from 47.4% a day ago, while the expectations for a 75 basis point hike have shrunk to 38.6% from 50.8%, according to CME’s FedWatch tool.

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