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Stock Market Update
The recent announcement from the Federal Reserve regarding the likelihood of no future rate hikes caused a surge in the Dow Jones Industrial Average and other U.S. stock indexes on Wednesday. The markets initially spiked following Fed Chair Jerome Powell’s statement indicating that the next policy move is unlikely to be a hike.
Market Response
The Dow soared by 500 points in response to the news, but later surrendered most of those gains to close up by 87 points, representing a 0.2% increase to 37,903. Conversely, the S&P 500 and Nasdaq both ended the day with a 0.3% decline.
Federal Reserve’s Plan
The Federal Reserve has outlined a significant reduction in quantitative tightening (QT) as a measure to address inflationary pressures. QT involves the central bank selling off assets such as treasuries or government bonds to reduce the money supply, leading to increased interest rates and tighter monetary conditions. Although QT may impact bank reserves, the current focus is on combating persistent inflation with little improvement in sight.
Meanwhile, Apple is set to release its quarterly earnings, with analysts optimistic about the possibility of the company surpassing expectations despite a slight decline in iPhone sales. Amazon also experienced a positive market response, reporting better-than-expected revenue for the first quarter, particularly driven by Amazon Web Services (AWS) and advertising.
Stock Performance
Shares of Amazon surged by nearly 2.2% by the end of the trading day, marking a 74% increase over the past year. On the other hand, Super Micro Computer faced a setback with a more than 14% drop in its stock value due to missing revenue expectations for the fiscal third quarter.
Additionally, CVS Health encountered challenges as its stock plummeted to a three-year low following a report of rising healthcare costs. The company’s adjusted earnings per share fell short of projections, contributing to a decline of over 16% in share value.
Johnson & Johnson made headlines with an announcement to settle all pending and future U.S. lawsuits related to its talc-based products by paying nearly $6.5 billion over a 25-year period. This decision led to a rise of approximately 4.5% in the company’s stock value.
Conversely, Starbucks disappointed investors with lower-than-expected revenue, earnings, and same-store sales growth in its latest quarterly report. The company’s net income and adjusted earnings per share were below estimates, resulting in a more than 15% decrease in stock value by the end of the day.
Bitcoin Market Update
Bitcoin continued its downward trend into May, dropping below $58,000. The cryptocurrency entered a bear market following a challenging April and ahead of the Federal Reserve’s interest rate decision. Despite being over 20% lower than its record high in March, Bitcoin still maintains a 30% increase year-to-date.
Overall, the stock market experienced a mix of positive and negative movements based on various company earnings reports and external factors like Federal Reserve announcements and cryptocurrency trends.
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