After Tuesday’s big rally, Wednesday’s session was muted most of the day, but it wasn’t boring. What moved the Nasdaq today? As is typically the case on FOMC meeting days, the Federal Reserve was on everyone’s radar.
While the market was pricing in a roughly 25% chance of a rate cut this month, it was no surprise that the Fed held steady. But that doesn’t mean they will continue to do so going forward. According to the Fed Funds futures, there’s a 77% chance that the Fed will cut rates next month. Further, the market is pricing in a 62% chance that the Fed cuts twice by its September meeting.
On some level, that feels bearish given that the Fed shouldn’t be cutting rates in a healthy environment. That said, with the U.S. economy mostly humming along, investors don’t want to fight the Fed. If it’s willing to be accommodative and dovish, investors don’t want to be stubborn.
That can be a boon for tech stocks, which tend to thrive in a low interest rate environment. If that ends up being the case, look for the PowerShares QQQ ETF (NASDAQ:QQQ) to benefit.
Chip stocks, like Advanced Micro Devices (NASDAQ:AMD), Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO) held up well on Wednesday after Tuesday’s powerful rally. Should the trade-war rhetoric continue to improve, the semiconductors should continue to see upside.
Adobe Systems (NASDAQ:ADBE) jumped more than 5% in Wednesday’s session, after the company beat on earnings and revenue expectations. However, management’s outlook for next quarter came up short of expectations, which makes today’s rally somewhat peculiar. It appears that investors are willing to give ADBE the benefit of the doubt and seem to like the partnership with Microsoft (NASDAQ:MSFT).
Speaking of MSFT, shares hit yet another new highs on the day, after doing so on Tuesday as well.
Jabil Inc (NYSE:JBL) jumped double digits on the day, rising more than 10% after better-than-expected earnings. Non-GAAP earnings of 57 cents per share was in-line with expectations, while revenue of $6.14 billion beat consensus estimates by $130 million and grew 12.9% year-over-year. Now, the stock is flirting with a major multi-year breakout.
T-Mobile (NASDAQ:TMUS) tacked on another 2.4% gain on Thursday, as it looks increasingly likely that it will get the green light from the DoJ to acquire Sprint (NYSE:S). The latter rose 3% on the same optimism, as reports peg Dish Network (NASDAQ:DISH) as the likely suitor to buy the duo’s asset sales, which are necessary for regulatory approval.
Shopify (NYSE:SHOP) jumped 7.5% to new highs following a positive take from its investor meeting. The stock hit another new all-time high on the day as the Shopify train just keeps on rolling. Should shares hit $356, it will be a triple from the December lows.
Video game stocks struggled on Wednesday, led lower by Activision Blizzard (NASDAQ:ATVI), which fell about 1%. Take-Two Interactive Software (NASDAQ:TTWO) ended flat after a strong last hour of trading, while Electronic Arts (NASDAQ:EA) ending higher on the day despite a lower open. The group was under pressure Wednesday following video game sales data showing an 11% year-over-year decline for May, while hardware sales slumped 20%.
Facebook (NASDAQ:FB) struggled again on Wednesday. The stock opened at its highs on Tuesday, but fell despite announcing its new cryptocurrency. That selling continued today, with the stock down 0.53%. It cast a shadow over social media stocks, with Twitter (NYSE:TWTR) falling 1%, Snap (NYSE:SNAP) dropping 1.3% and Pinterest (NYSE:PINS) sinking 2.5%.
The Bottom Line on the Nasdaq Today
The Fed was the most polarizing event of the day and its aftermath will show itself in the days and weeks to come. Will the event act as a catalyst to propel stocks to new highs? After all, the Nasdaq is less than 200 points or about 2.1% away from those highs now. Or will investors sell the market lower despite the Fed’s accommodative stance?
Let price be the guide. If Wednesday’s closing action is any indication, buyers want in on the market heading into the early part of summer.
What I really want to see how is how the Nasdaq, S&P 500 and Dow Jones trade through the rest of the week. While they rose 0.42%, 0.33% and 0.15% on Wednesday, respectively, I want to see if the move has staying power. A strong finish to the week very well could bring new highs, but we need to see that continuation to confirm it.
Let’s see if chip stocks can continue to push higher and if Adobe can climb up toward $300. And for Pete’s sake, can we get some participation from the FANG stocks?