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What you need to know today
A much-anticipated Fed hike
The Federal Reserve hiked by 25 basis points, taking rates to a target range of 5.25% to 5.5%, the highest since 2001. The much-anticipated hike was unanimous among voting committee members. However, Chair Jerome Powell left the door open to a subsequent rate hike, saying the central bank will make decisions "meeting by meeting."
Muted markets
U.S. markets reacted little to the Fed's rate hike. Still, major indexes were mixed, with only the Dow Jones Industrial Average rising for the 13th straight day. Europe's benchmark Stoxx 600 index slipped 0.53%. But that wasn't as bad as France's CAC 40, which fell 1.4% as shares of luxury behemoth LVMH declined 5.15% on the back of a surprising drop in U.S. sales.
Meta's quarters of efficiency
Meta's second-quarter earnings and revenue beat Wall Street estimates. Revenue rose 11% from a year earlier to hit $32 billion, the first time since 2021 the company's had double-digit growth. Meta's expected revenue in the third quarter is higher than analysts' expectations as well. That's all music to investors' ears (disregarding Meta's mounting losses in its Reality Labs unit). Meta shares rose almost 7% in extended trading.
Big Tech aftermath
Meanwhile, Alphabet shares jumped 5.78% while Microsoft shares sank 3.76%. Both companies reported their earnings after markets closed Tuesday. Investors and analysts cheered Alphabet's growth in cloud computing revenue. Microsoft's worse-than-expected guidance disappointed investors, but analysts remain optimistic on the company's prospects in artificial intelligence.
[PRO] Benefiting from potential pause
The Federal Reserve raised rates by 25 basis points — and more crucially, left open the possibility of pausing its hiking cycle. CNBC Pro analyzed the Russell 1000 Index — which tracks the top 1000 stocks of the 3,000 largest publicly held companies in America — to find out which stocks will benefit from the Fed's wait-and-see approach.
The bottom line
There was something for everyone at the Fed's latest meeting. At his post-meeting press conference, Chair Jerome Powell, in other words, deftly negotiated expectations from market bulls and bears, and somehow managed to reaffirm the case of both camps.
Market bulls will seize on Powell's comment that "it's possible that [the Fed] would choose to hold steady and we're going to be making careful assessments, as I said, meeting by meeting." That is, the two rate hikes left for this year — as suggested during the Fed's June meeting — might end up being just one. This implies that the Fed's at the end of its hiking cycle after this month's quarter percentage point raise. Supporting this thought is Powell's admission that the Fed "can afford to be a little patient" in seeing the effects of tighter monetary policy flow through the economy.
But there was much for market bears to chew on, too. Powell stated plainly that he doesn't think the Fed will be comfortable cutting rates this year — or even the next. "Policy has not been restrictive enough for long enough," Powell said. That means stocks will have to fight the tide if they want to rise further than they already have this year. But the Fed isn't that concerned about financial markets — it's even willing to endure "a period of below-trend growth and some softening of labor market conditions" because "the labor market remains very tight," Powell said.
All in all, it's a "hawkish hold," in the words of Frances Donald, global chief economist for Manulife Investment Management. The "hawkish" part will please the bears, while the "hold" portion will appeal to the bulls.
Markets had already priced in the hike, so they were muted. Treasury yields fell instead of climbing in tandem with interest rate rises. The S&P 500 was essentially flat, the Nasdaq Composite dipped 0.12% and the Dow Jones Industrial Average rose 0.23%. That gives the Dow its 13th straight day of wins, matching its longest winning streak since 1987. (For more on why the Dow seems to have such strong momentum now, read this piece by CNBC's Fred Imbert.) If the Dow rises in its next session, that'd be a streak not seen in 126 years (!).
