Bond yields dropped after Jerome Powell said the Federal Reserve hasn’t made a decision to hike at every other meeting, bolstering bets the central bank will skip a rate increase in September.

Two-year U.S. yields fell four basis points to 4.84 per cent. The dollar dropped. The S&P 500 was little changed, the tech-heavy Nasdaq 100 underperformed and the Dow Jones Industrial Average edged slightly higher — notching its 13th straight advance — the longest winning run since 1987. In late trading, Facebook parent Meta Platforms Inc. climbed after projecting revenue that beat estimates.

The Fed raised rates by 25 basis points to the highest level in 22 years, and Powell said additional increases will depend on incoming data as officials fine-tune their effort to further quell inflation. Swaps referencing future Fed decisions priced in slightly lower odds of another quarter-point rate increase this year, which ebbed to 47 per cent.


  • Rajeev Sharma, managing director of fixed income at Key Private Bank:
    • “In our opinion, the rate hiking cycle is done and the Fed will now pause for the rest of the year. The latest market reaction also supports this thesis with yields dipping slightly across the front end of the yield curve.”
  • Frances Donald, global chief economist at Manulife Investment Management:
    • “We now believe that the Fed is on a prolonged ‘hawkish hold’. In our base case, their next move will likely be a cut but it will take until 2024 until we see it. That said, Powell will have no choice but to keep the threat of hikes alive, lest he encourage markets to prematurely price in cuts and reignite inflation expectations. Indeed, throughout this coming extended pause, the risk to our base case will likely almost always be for one last hike to cement the disinflationary trend. Because inflation’s improvement is likely to stall in the next 2-3 reasons for largely mathematical reasons, market probabilities of rate hikes at future meetings will remain non-zero and would be unwise to completely fade this even as we don’t expect any additional hikes.”
  • Chris Zaccarelli, chief investment officer for Independent Advisor Alliance:
    • “There was something for everyone in today’s Fed meeting. Bears can point to Powell’s insistence that all meetings are live and that Core Inflation is ‘pretty elevated’ and bulls can point to Powell’s insistence that they could easily skip the next meeting and keep rates unchanged in September.”
  • Seema Shah, chief global strategist at Principal Asset Management:
    • “While the statement is a yawner, the broad signal is of a Fed that considers each monetary policy meeting as ‘live’. Data dependence remains the buzzword and, given the confusing signals of waning inflation but a tight labor market, keeping all options on the table seems to be a sensible approach.”
  • Edward Moya, senior market analyst for the Americas at Oanda:
    • “The Fed is keeping optionality for future rate increases but it probably won’t need them. The disinflation process will remain as the economy is weakening and the corporate world should start feeling the impact of tighter credit conditions.”
  • Preston Caldwell, chief U.S. economist at Morningstar:
    • “We expect today’s meeting to be the Fed’s final rate hike. Even with economic growth showing no signs yet of slowing to the below-trend growth rate usually needed to cause broad-based disinflationary pressure in the economy, inflation is nevertheless showing signs of abating due to relaxing of supply side constraints. As such, we expect the Fed to pause on rate hikes in its final three meetings of 2023.”
  • Jon Maier, chief investment officer at Global X:
    • “Now, it looks like the Fed might be closing in on the end of its current cycle of rate hikes. But they’re not painting themselves into a corner – they’re keeping an option open for another possible rate increase later this year. It shows they’re staying flexible and ready to respond to any economic twists and turns that might come up.”
  • David Russell, vice president of Market Intelligence at TradeStation:
    • “The Fed is in wait-and-see mode. They’re going to get two more months of employment and inflation data before the September meeting, so there’s no reason to make any changes now. Investors can now put this behind them and get back to earnings.”

Another driver of trading Wednesday was the large batch of earnings reports, with results from big tech being highly scrutinized after the shares notched a historic advance in the first six months of the year. 

Google parent Alphabet Inc. climbed as revenue beat expectations, while Microsoft Corp. fell on a tepid sales growth and Texas Instruments Inc.’s lukewarm forecast weighed on chipmakers.

“Big tech earnings have been very Darwinian, and investors are only rewarding the companies that truly post strong results,” David Bahnsen, chief investment officer at the Bahnsen Group. “After extreme gains so far this year in big tech stocks, we have now moved to a phase where each company’s stock price is very non-correlated to one another.”

Corporate Highlights

  • Boeing Co. rose after generating US$2.58 billion in free cash flow in the second quarter, far exceeding expectations, amid a flurry of jet deliveries.
  • Regional banks climbed as news that PacWest Bancorp is being bought by Banc of California bolstered confidence in the industry. Wells Fargo & Co. paced gains in larger lenders on plans to repurchase as much as US$30 billion of its shares.
  • Rail giant Union Pacific Corp. advanced after appointing Jim Vena as its new chief executive officer. Retailer Gap Inc. gained after naming Mattel Inc.’s Richard Dickson as its next CEO.
  • Coca-Cola Co. raised its full-year guidance after second-quarter results show continued momentum and consumer willingness to pay higher prices to quench their thirst with the company’s sugary sodas, fruit juices and sports drinks.
  • AT&T Inc. reported profit and free cash flow that topped analysts’ estimates, offering a brighter picture as the phone giant faces a challenging restructuring effort, a heavy debt load and the potentially high costs of cleaning lead out of its old copper phone network.
  • Visa Inc. posted card-spending growth that was more robust than Wall Street expected as consumer demand for travel and dining out remained strong last quarter.
  • Snap Inc. fell after projecting revenue at the lower end of analysts’ estimates for this quarter, signaling that improvements to the digital advertising business are taking longer than expected to pay off.

Key events this week:

  • China industrial profits, Thursday
  • ECB rate decision, Thursday
  • U.S. GDP, durable goods orders, initial jobless claims, wholesale inventories, Thursday
  • Japan Tokyo CPI, Friday
  • BOJ rate decision, Friday
  • Eurozone economic confidence, consumer confidence, Friday
  • U.S. consumer income, employment cost index, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:


  • The S&P 500 was little changed as of 4 p.m. New York time
  • The Nasdaq 100 fell 0.4 per cent
  • The Dow Jones Industrial Average rose 0.2 per cent
  • The MSCI World index was little changed


  • The Bloomberg Dollar Spot Index fell 0.3 per cent
  • The euro rose 0.4 per cent to US$1.1095
  • The British pound rose 0.3 per cent to US$1.2946
  • The Japanese yen rose 0.5 per cent to 140.25 per dollar


  • Bitcoin rose 0.6 per cent to US$29,411.02
  • Ether rose 0.6 per cent to US$1,873.36


  • The yield on 10-year Treasuries declined three basis points to 3.86 per cent
  • Germany’s 10-year yield advanced six basis points to 2.48 per cent
  • Britain’s 10-year yield advanced one basis point to 4.28 per cent


  • West Texas Intermediate crude fell 0.9 per cent to US$78.93 a barrel
  • Gold futures rose 0.6 per cent to US$2,015.30 an ounce