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Wednesday was a busy, but successful, day for stocks, with today's upside fueled by a well-received round of earnings and the latest Fed policy update.
There was no shortage of corporate updates for investors to sift through, but last night's results from Big Tech titans Alphabet (GOOGL, +7.6%) and Microsoft (MSFT, +6.7%) drew the most attention.
While Alphabet missed on both the top and bottom lines, the company did see strong growth in Google Search revenue thanks to travel and retail searches. Microsoft's fiscal fourth-quarter results also came up short, but it expects double-digit revenue and operating income growth in fiscal 2023 (on a currency adjusted basis). Both firms reported their slowest revenue growth since 2020, and pointed to a stronger dollar as a significant headwind.
Also in focus today was the Federal Reserve, which, as expected, raised interest rates by 75 basis points (a basis point is one-one hundredth of a percentage point).
"With some softening of recent economic data, Fed officials likely didn't feel the pressure to go beyond market consensus with regards to the level of rate change in the policy rate," says Charlie Ripley, senior investment strategist at Allianz Investment Management. He adds that there is plenty of time between now and the Fed's September meeting for the central bank to see if policy changes that have already been made are working. Overall, there were no surprises in today's meeting, and what happened this afternoon ultimately leaves the central bank's options open this fall, he says.
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Stocks were solidly higher heading into the mid-afternoon central bank announcement, but skyrocketed following it. The Dow Jones Industrial Average jumped 1.4% to 32,197 and the S&P 500 Index soared 2.6% to 4,023. The Nasdaq Composite, meanwhile, spiked 4.1% to 12,032, its best day since April 2020.
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Other news in the stock market today:
Red-hot inflation is not only a thorn in the Fed's side, but it – as we have witnessed time and time again – is also weighing on consumer-facing companies. Take for instance the airline industry, which is seeing higher fuel costs weigh on financial results. "Inflation is a major headache for all industries and the airline business is not immune to rising costs," says Peter McNally, global sector lead for industrials, materials and energy at research firm Third Bridge Group.
And these rising costs are creating a less profitable business environment than before the pandemic, even as "the underlying demand for air travel is strong." But, he adds, business and international travel have yet to recover at the same pace that leisure has, and these two areas could create a key source of future profits for airlines.
While there is certainly a reason to hold out hope for the industry, not all airline stocks are created equal. Here, we take a closer look at seven airline companies to see which ones are best positioned to ride out this rocky recovery.
Karee Venema was long GOOGL as of this writing.
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