US Fed Raised Interest Rates : How are you impacted? Google, Microsoft Jump 8%. Check today's gainers and losers
Share Market Today in the US
The US Federal Reserve hiked interest rates by 75 basis points or 0.75%. The markets ended positively post the hike which was apparently in line with what investors had anticipated. The Dow Jones was up 1.4%, while the S&P 500 and Nasdaq closed higher at 3% and 4% respectively, registering their biggest one-day jumps since April 2020.
US Fed Raised Interest Rates: How are you impacted?
How do you describe a good day in the markets? Well, on a day when major tech stocks rally based on solid revenue forecasts and the Federal Reserve raising interest rates as anticipated by most investors, you could conclude a happy ending for the markets. Following the quarterly results of Microsoft and Google which sent their share prices soaring, the Federal Reserve's 75 basis points or 0.75% increase in interest rates added cheer to the markets. But how does it impact investors like you and me?
Impact on US Market Investors
- A Fed rate hike implies higher borrowing costs for companies. In such a scenario, stocks that aren’t profitable get hit the most due to less availability of cash flows.
- Growth stocks rely on the availability of capital to increase their operations, and higher interest rates essentially mean higher borrowing costs. This could affect their earnings as well.
- On the other hand, stocks with good cash flows which do not rely on extra debt to finance operations benefit. Stocks in the essentials, consumer goods, and industrial sectors can be better placed during a rate hike.
- In the case of bonds, investing in only high-quality AAA-rated bonds can be of help. Short-duration bonds are preferred over long-duration ones as they are less sensitive to interest rate changes. As a thumb rule, bond prices are inversely related to increases in interest rates. Hence, the price of short-duration bonds is less volatile compared to long-duration bonds.
Impact on Indian Market Investors
- When the US Federal Reserve raises interest rates, it affects markets globally. Investors can expect even the RBI to increase interest rates in the near future which can affect several stocks which rely on capital for their growth.
- Most importantly, a Fed rate hike increases the yields offered by the US Treasury Bills propelling Foreign Institutional Investors (FIIs) who had invested in the Indian markets to sell Indian equities in large numbers. This could further cause the share markets to fall.
- Also, the Information Technology (IT) industry in India, which has a significant revenue share coming from the US, could get impacted negatively as companies in the US decrease their IT spending.
Impact of Fed Rate Hike on the Rupee
- A hike in interest rates in the US has a negative impact on the value of the rupee.
- US Treasuries quote attractive yields which strengthen the demand for dollars as FIIs sell Indian equities to buy more of them.
- The supply for the Indian rupee increases as FIIs turn net-sellers eventually weakening the Indian rupee. Expect the USD-INR index to rise in the coming periods.
Check today's gainers and losers: Post Fed Rate Hike
Amazon jumped 5%: Amazon share price jumped along with other Big Tech on the back of a relief rally on Wall Street after strong results by Google and Microsoft.
ARK Innovation ETF gained 7%: ARK Innovation ETF jumped driven by a sharp rally in underlying stocks of UiPath, and Tesla amid overall positivity on Wall street.
Coinbase jumped 11%: Coinbase share price jumped on the back of positivity on Wall Street after strong earnings by Google, and Microsoft. Cathie Wood's Ark Investment Management sold a total of 1.4 million shares of COIN this week.
Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X ETF jumped 7%: Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X ETF price rallied following the gains in the energy stocks post amid volatility in oil prices.
Direxion Daily Semiconductor Bull 3X ETF shot up 14%: Direxion Daily Semiconductor Bull 3X ETF price jumped on the back of a sharp rally in semiconductor stocks such as Nvidia, Intel - Relief rally in Tech stocks after strong results by Google and Microsoft.
Direxion Daily Technology Bull 3X ETF shot up 13%: Direxion Daily Technology Bull 3X ETF price jumped on the back of a sharp rally in Tech stocks after strong results by Google and Microsoft.
Google shot up 8%: Google (Alphabet) share price jumped sharply after posting strong business growth in the June quarter, and robust revenue guidance for the 2nd half of the year 2022.
Microsoft surged 7%: Microsoft share price accelerated after reporting solid business growth in the June quarter, and a robust business outlook for the 2nd half of 2022.
Nvidia shot up 8%: Nvidia's share price rose sharply along with other semiconductor stocks driven by a relief rally in Tech stocks after strong results by Google and Microsoft, a 0.75% interest rate hike by the US central bank.
PayPal shot up 12%: PayPal's share price jumped after a declaration of a large stock purchase by Elliott Management - a popular hedge fund.
ProShares Bitcoin Strategy ETF spiked 9%: ProShares Bitcoin Strategy ETF price jumped on the back of solid gains in the prices and volume of Bitcoin after the 0.75% rate hike by US central bank.
ProShares Ultra Semiconductors ETF jumped 10%: ProShares Ultra Semiconductors ETF price rallied on the back of a sharp rally in semiconductor stocks such as Nvidia, Intel - Relief rally in Tech stocks after strong results by Google and Microsoft.
ProShares UltraPro S&P 500 ETF jumped 8%: ProShares UltraPro S&P 500 ETF jumped sharply driven by a relief rally in Tech stocks after strong results by Google and Microsoft, a 0.75% interest rate hike by the US central bank.
Roblox spiked 8%: Roblox share price jumped after strong growth report in consumer acquisition by its counterpart Unity Software, solid growth expected in September quarter.
Shopify jumped 12%: Shopify stock price gained over speculation that Cathie Wood's ARK Investment would step in to buy shares.
Snowflake shot up 9%: Snowflake share price witnessed short covering along with other cloud stocks driven a positivity on wall street after solid business growth by Google, and Microsoft in the June quarter.
Spotify skyrocketed 12%: Spotify share price gained after reporting strong quarterly earnings - total users, revenue beat earnings estimates.
Square up 10%: Square share price jumped following a positive sentiment in Fintech stocks post the 0.75% rate hike by US fed (as per the expectations).
Twilio jumped 7%: Twilio share price witnessed short covering along with other cloud stocks driven a positivity on wall street after solid business growth by Google, and Microsoft in the June quarter.
UiPath jumped 7%: UiPath share price boomed along with other tech & growth stocks after a solid earring by Tech majors Google and Microsoft.
Unity shot up 11%: Unity share price jumped post solid growth in consumer acquisition - 32% revenue growth till June 2022.
Upstart jumped 9%: Upstart share price rallied following a positive sentiment in Fintech stocks post the 0.75% rate hike by US fed (as per the expectations).
By how much did the Fed hike interest rates?
The US Federal Reserve hiked interest rates by 0.75%.
Why did the Fed hike interest rates?
4-decade high inflation in the US had made the Fed hike rates by 0.75%. The Central banks of most nations around are looking ways to tackle sky-high inflation by hiking the lending rates.
Why did the stock market rally after the Fed rate hike?
The Federal Reserve raised interest rates in line with what the investors had anticipated resulting in positive sentiments overall.
Which stock gained the most after the Fed rate hike?
Most of the stocks ended higher with Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X ETF gaining 14%.