Feb 1 (Reuters) - U.S. stocks bounced back on Thursday as investors looked ahead to a spate of high-profile earnings the day after the Federal Reserve tossed cold water on lingering bets that the central bank would begin cutting its key interest rate as early as March.
While a broad rally sent all three major U.S. stock indexes were higher, the tech-laden Nasdaq was out front, with results from Apple Inc (AAPL.O), opens new tab, Amazon.com (AMZN.O), opens new tab and Meta Platforms (META.O), opens new tab expected after the bell.
"Clearly, we're in the heart of earnings season and expectations are broadly being met," said Bill Northey, senior investment director at U.S. Bank Wealth Management in Billings, Montana. "But we're getting guidance for the end of the year and expectations are starting to modesty erode, which is consistent with a still growing but slowing U.S. economic and corporate earnings environment."
Apple's iPhone sales are expected to have seen the best growth in five quarters, and investors will gauge the results of Amazon.com's logistics overhaul and the fee revenue from its "Buy With Prime" service.
Meta Platforms' advertising business is likely to show a muted effect from generative AI on its advertising business.
On Wednesday, the Federal Open Markets Committee (FOMC) left its policy rate unchanged as expected. At his press conference, Fed Chair Jerome Powell called a March rate cut "unlikely," resetting market expectations of a dovish Fed pivot in the first quarter, and prompting a steep sell-off.
The KBW Regional Banking index (.KRX), opens new tab fell 2.1%, weighed down by the 8.9% drop in New York Community Bancorp's (NYCB.N), opens new tab shares after the company reported pain in its commercial real estate portfolio, sparking renewed fears over the health of U.S. regional lenders.
Fourth quarter reporting season is going full-bore, with 208 of the companies in the S&P 500 having reported. Of those, 80% have delivered consensus-beating earnings, according to LSEG.
Analysts now expect aggregate S&P 500 earnings growth of 6.4% year-on-year for the October-December period, an improvement over the 4.7% growth seen on Jan. 1, per LSEG.
A raft of economic data showed rising productivity helping to cap labor costs, while an increase in announced layoffs and weekly jobless claims provided further evidence of softening in the labor market, which is viewed by the Fed as a precondition to assuring a sustainable downward path for inflation.
"We see these data, on the eve of the labor report tomorrow, as consistent with a healthy but moderating labor market," Northey added. "(These reports) are consistent with our view of the economic path for 2024; that it will continue to grow, but at a slower pace."
The S&P 500 climbed 0.94% to end the session at 4,891.21 points. The Nasdaq gained 1.04% to 15,321.61 points, while Dow Jones Industrial Average rose 0.74% to 38,434.29 points.
Of the 11 S&P 500 sector indexes, nine rose, led by consumer staples (.SPLRCS), opens new tab, up 1.59%, followed by a 1.42% gain in materials (.SPLRCM), opens new tab.
Merck (MRK.N), opens new tab advanced 4.2% after the drug maker's upbeat fourth-quarter results.
Qualcomm (QCOM.O), opens new tab fell 4.6% on concerns over Android sales in China.
Honeywell (HON.O), opens new tab was off 3.1% after the diversified industrial conglomerate provided a disappointing first-quarter results.
Advancing issues outnumbered falling ones within the S&P 500 (.AD.SPX), opens new tab by a 3.3-to-one ratio.
The S&P 500 posted 28 new highs and 5 new lows; the Nasdaq recorded 61 new highs and 103 new lows.
Reporting by Stephen Culp; Additional reporting by Ankika Biswas and Johann M Cherian in Bengaluru; Editing by Aurora Ellis
