[New York Stock Market] Tech Stocks Rally on Meta Surge... Nasdaq Up 3.25%

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market closed mixed on the 2nd (local time), the day after the Federal Reserve's (Fed) interest rate decision. In particular, Meta, which disclosed strong earnings, surged more than 20%, leading a notable rally in the tech-heavy Nasdaq index.

On this day in the New York stock market, the Nasdaq index closed at 12,200.82, up 384.50 points (3.25%) from the previous session. This is the highest level since September last year. It is also the largest daily gain since November 30 of last year. On the same day, the S&P 500 index, centered on large-cap stocks, rose 60.55 points (1.47%) to 4,179.76, marking the highest level in five months. Only the Dow Jones Industrial Average fell, closing down 39.02 points (0.11%) at 34,053.94.

By sector, rallies in telecommunications and technology stocks stood out. Within the S&P 500, seven sectors excluding energy, materials, healthcare, and consumer staples rose. Meta, the parent company of Facebook, closed up a remarkable 23.28% from the previous session due to its earnings announcement and share buyback plan disclosed the day before. At one point during the session, Meta's stock price reached $197, pushing its market capitalization over $500 billion. Alphabet and Amazon jumped 7.28% and 7.38%, respectively. Apple and Tesla also rose more than 3%. FedEx closed up 6.11% after announcing it would lay off 10% of its executives.

[Image source=Reuters Yonhap News]

On this day, investors digested the Fed's interest rate decision from the previous day while keeping an eye on corporate earnings. Earlier, the Fed raised the benchmark interest rate by 0.25 percentage points to 4.50%?4.75%, adjusting the pace of tightening once again. The policy statement also diagnosed that inflation is slowing down, leading to widespread assessments that the Fed has entered the final phase of the rate hike cycle. Following the Fed, the European Central Bank (ECB) and the Bank of England (BOE) also raised their benchmark interest rates by 0.5 percentage points each on the same day.

Meta, which disclosed better-than-expected earnings the day before, surged more than 23% on this day, playing a leading role in driving the entire New York stock market. On Wall Street, target prices were raised one after another. Ross Sandler, an analyst at Barclays, raised Meta's target price from $165 to $260. Mark Mahani, an analyst at Evercore ISI, also raised the target price to $275, citing cost reductions and a larger-than-expected share buyback program as reasons. He also evaluated, "Does Meta deserve a 20% rise? Yes." Barton Crockett of Rosenblatt also maintained a buy rating and set a target price of $220, saying, "I am confident in the attractive valuation."

After the market close on this day, earnings reports from Apple, Alphabet, Amazon, Ford Motor Company, Starbucks, and others will be released. If these big tech companies also join the earnings surprise lineup, expectations are rising that the rally centered on tech stocks will continue for the time being.

The Wall Street Journal (WSJ) reported that the Nasdaq index is experiencing its best start to the year since 1975. The closing price on this day is 17% higher than the beginning of the year. The publication also reported that the S&P 500 index is on track for a golden cross, where the 50-day short-term moving average crosses above the 200-day medium- to long-term moving average. This is the first golden cross for the S&P 500 since March 2022.

However, economic media CNBC warned, "The tech stock rally is contributing to the rise in the New York stock market this year," but "many analysts do not expect most stocks to maintain their momentum from the beginning of the year." BlackRock's Chief Strategist Kristie Akulian also pointed out, "Although Chairman Powell sounded somewhat more dovish than before, we still do not believe inflation will fall as quickly as the market expects."

In the New York bond market, U.S. Treasury yields continued a slight decline. The 10-year Treasury yield fell slightly to around 3.39%. The 2-year yield, sensitive to monetary policy, hovered around 4.09%. The inversion of the yield curve, where the long-term 10-year yield is below the short-term 2-year and 3-month yields, also continues. This is generally regarded as a precursor to a recession.

Concerns about a recession are also confirmed by recent corporate layoffs. Due to economic uncertainty, this trend of layoffs is expected to continue for the time being. According to Challenger, Gray & Christmas (CG&C), U.S. companies' layoff plans in January totaled 102,943, a 136% increase from the previous month. This is the largest scale in two years and five months since September 2020.

However, this layoff trend has not yet been confirmed in unemployment statistics. According to the U.S. Department of Labor, new unemployment claims for the week of January 22?28 were 183,000, down 3,000 from the previous week. This is the lowest level since April last year and below Wall Street's forecast of 195,000. Weekly unemployment claims in the U.S. have been declining for five consecutive weeks. Meanwhile, continuing claims for unemployment benefits, which require at least two weeks of claims, also decreased by 11,000 to 1.66 million.

The value of the dollar rose. The Dollar Index, which measures the dollar's value against six major currencies, rose 0.5% from the previous session to around 101.7.

Oil prices fell to their lowest level in three weeks. On the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) crude oil for March delivery closed at $75.88 per barrel, down 53 cents (0.69%) from the previous month. This closing price is the lowest since January 10.