This afternoon, the biggest news on Wall Street is that the Federal Reserve has raised interest rates again. The day leading up to this verdict has been difficult for some investors. Specifically, today began with many tech stocks falling, bracing for bad news from the Federal Open Markets Committee (FOMC). However, the tides have since changed; many of tech’s biggest names rebounded into market close.
Of course, the sector has been under a lot of scrutiny from experts lately. When Netflix (NASDAQ:NFLX) reported disappointing earnings recently, it sparked discussion of whether the FAANG era was coming to an end. For anyone unaware, FAANG is an acronym referring to five of the biggest tech stocks: Meta Platforms (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG).
This morning, AAPL, AMZN, FB and GOOGL all began the day by dipping. This was expected, given the bearish energy swirling around high-growth stocks. Close to mid-day, however, they each picked up positive momentum. AMZN stock closed the day up a little over 1%. Meanwhile, Apple and Alphabet both closed up by more than 4% while Meta closed up more than 5%.
Let’s take a closer look at what today’s news means for markets.
What’s Happening with Tech Stocks?
What can investors expect from today’s FOMC meeting? Simply put, interest rates have been raised by half a percentage point. As Barron’s reports, this signals the start of a “double-barreled push by the central bank to rein in inflation and cool the economy.”
Of course, the more appropriate question might be about what this means for tech stocks. When interest rates were raised earlier in the year, experts speculated that it could constrain high-growth names, citing the tech sector as an example. In late January 2022, CNBC reported the following:
“Strategists expect the adjustment to higher yields to result in stock market volatility and lower valuations for growth and tech stocks.”
If that happens again, it will certainly shake investor confidence in tech stocks. For the moment, though, it seems the sector is determined to not let that happen. These names have rallied in the face of an important news announcement that could have easily sent shares down.
Looking forward, more interest rate hikes are likely coming. Per Barron’s, the FOMC “anticipates ongoing increases in the target range will be appropriate.”
What It Means
While the future is uncertain, further rate hikes remain likely. Wall Street hates uncertainty, but it can’t hate what it saw from tech stocks today.
Yes, rate hikes are coming. But that doesn’t mean they will automatically push high-growth sectors down. The last time hike fears were high, InvestorPlace analyst Luke Lango reminded investors that the phenomenon can actually lead to significant opportunities for high-growth picks.
If today’s performance is any indication, investors may be about to see something similar play out.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
