All sectors joined in the party Wednesday, as earnings rolled in with considerable strength. The Federal Reserve’s comments on interest rates also didn’t hurt.
The S&P 500 rose 1.24%, helped by the tech-heavy Nasdaq’s gains of 1.35%. Bearishly, the 10-Year Treasury yield kept slipping, down to 0.57%. Yields fall when prices rise. The bond market is signaling low economic growth expectations.
FANG stocks rose 1.52%, but semiconductor stocks, which also weigh heavily on the S&P 500’s price movement, rose 2.06%, as seen by the move in the iShares (SOXX) - Get iShares PHLX Semiconductor ETF Report Semiconductor ETF. Advanced Micro Devices posted an exceptionally strong quarter, but also said its revenue will grow 32% for 2020, above the previous guidance of 20% to 30%. This bodes well for chip sales, but analysts also noted that AMD (AMD) - Get Advanced Micro Devices, Inc. Report is likely taking market share from Intel (INTC) - Get Intel Corporation (INTC) Report. AMD rose 12.54%. Intel fell 2.38%.
Starbucks posted a less-severe-than-expected revenue decline and a narrower net loss than expected. The company also guided for less severe same-store-sales declines for the year, validating the thesis that the second quarter was the worst for the pandemic and that the company is on track for a recovery. The stock, beaten up into earnings, rose 3.72%. Large cap consumer discretionary stocks rose 2.24% on the positive read from Starbucks (SBUX) - Get Starbucks Corporation Report.
Every sector in the U.S market rose, with some cyclical sectors rising more than 2%.
The Federal Reserve also said it will remain on its 0% benchmark lending rate path, which supports stocks, but can no longer boost them as interest cannot fall much from here.
While quarterly results have been strong and some company guidance has been strong, positive sentiment on the near future hinges on a vaccine and a virus that gets under control. Meanwhile, consumer confidence and reopening data have been weak.
Here's what Wall Street's saying:
Andrew Charles, Restaurants Analyst, Cowen on Starbucks:
"June's sequential improvement in traffic was enough to offset a deceleration in check growth. Our focus for SBUX is on the trajectory of sales improvement in both the U.S. and China amid COVID-19. We are more optimistic on the U.S., which had stronger performance prior to COVID-19.”
Team, Goldman Sachs Equity Research:
"In week 13 of the Measuring the Reopening of America series, both our stay-at-home and back-to-normal metrics stabilized as the pace of reopening slows. Mobility, retail and dining data show a halt in recovery while eCommerce, online payments and video conferencing show signs of reacceleration, as many states employ more restrictive policies.”
Seema Shah, Chief Strategist, Principal Global Investors:
"There is no doubt that the Federal Reserve will do what it can to prop up the economy and markets – Jerome Powell re-emphasized their continuing commitment. But with rates already so low, monetary policy is becoming less effective at stimulating the economy. As even Robert Kaplan, president of the Dallas Fed, said, wearing masks would be more a more effective economic policy than anything fiscal or monetary stimulus could do. Policymakers can soften a downturn, but ultimately, they do not have the power to prevent it.”