Wall Street rallies on hopes of smaller Fed rate hikes

Oct 21 (Reuters) – The S&P 500 and the Dow rose on Friday after a report said the U.S. Federal Reserve will likely debate on signaling plans for a smaller interest rate hike in December, while declines in social media firms capped gains on the Nasdaq.

Some Fed officials have begun sounding out their desire to slow down the pace of increases soon, according to the Wall Street Journal, and how to signal plans to approve a smaller increase in December.

“I would say that the Fed now is looking at easing up on the magnitude or slowing its rate hikes, which underscores its price stability campaign,” said Joe Brusuelas, chief economist at RSM, a U.S.-based consulting firm.

Stock markets have been hammered by worries of aggressive rate-hiking cycle tipping the U.S. economy into a recession, with the benchmark 10-year U.S. Treasury yield hitting fresh 15-year highs earlier in the session.

Traders are still widely expecting a fourth 75-basis-point hike at the central bank’s November meeting. FEDWATCH

The report helped markets recoup declines from earlier in the session when Snap Inc (SNAP.N) plummeted 30.86% after posting its slowest quarterly revenue growth in five years as advertisers cut spending due to inflation and geopolitical woes.

Other companies that rely heavily on ad revenue such as Alphabet Inc (GOOGL.O) and Meta Platforms Inc (META.O) fell 0.20% and 2.52%, respectively, pushing the S&P 500 communication services sector index (.SPLRCL) down 0.55%.

“It’s not uncommon for companies to cut back on advertising spending during concerns of an economic slowdown,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

“Right now you don’t want to be in a Snap or a Meta, and it’s probably going to transfer over to Alphabet.”

At 12:00 p.m. ET, the Dow Jones Industrial Average (.DJI) was up 444.56 points, or 1.47%, at 30,778.15, the S&P 500 (.SPX) was up 46.56 points, or 1.27%, at 3,712.34.

The Nasdaq Composite (.IXIC) was up 110.56 points, or 1.04%, at 10,725.41.

The third-quarter reporting season so far has been better-than-feared, prompting analysts to raise earnings expectations for S&P 500 companies to a 3.1% increase from 2.8% earlier in the week, according to Refinitiv data.

It is still well below the 11.1% rise that was forecast at the start of July.

Following the earnings-driven gains from earlier this week, the S&P 500 and the Nasdaq are set for their best week in six, while the Dow eyed its biggest weekly gain since late June.

Verizon Communications Inc shed 5.27% as its profit slid 23% and the carrier missed estimates for wireless subscriber additions.

American Express (AXP.N) fell 5.66% after it built bigger provisions to prepare for potential defaults as an economic downturn looms.

Schlumberger (SLB.N) rose 9.2%, pulling the S&P 500 energy sector up 2.2%, on reporting a quarterly profit above expectations.

Advancing issues outnumbered decliners for a 1.62-to-1 ratio on the NYSE and a 1.39-to-1 ratio on the Nasdaq.

The S&P index recorded seven new 52-week highs and 32 new lows, while the Nasdaq recorded 25 new highs and 252 new lows.

Reporting by Shreyashi Sanyal and Ankika Biswas in Bengaluru; Additional reporting by Bansari Mayur Kamdar; Editing by Anil D’Silva, Arun Koyyur and Shounak Dasgupta

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