U.S. stocks closed near session highs following the Federal Reserve's decision to raise interest rates by three-quarters of a percentage point.  The move led to the S&P 500 jumping 2.6%, the Dow Jones Industrial Average 1.4%, and the the tech-heavy Nasdaq 4.1%, which was the stock exchange's biggest gain in over two years. Art Hogan, Managing Director & Chief Market Strategist of B. Riely, joins Cheddar News' Closing Bell to discuss.

Closing Bell

U.S. Stocks Close Near Session Highs Following Fed Decision

are always good to have you on the show, especially on a major Fed day in the stock market in rally mode. What's your take? Well, my first take is, it's awfully nice to talk to you on the day the market's up. It seems like we've had so many conversations when the market's been down. I think that the market was actually a pretty good stead as, as we entered the day because we had a couple of household name companies that reported better than feared earnings results and better than fear. It seems to be the new good and, and, and certainly, um, that kicked off the day in the right fashion. And then the Fed delivered three things I think you touched on all of them 75 basis points consensus. So that was good news. You have a chairman of the Fed that's talking about the fact that at some point that likely decrease the size of the rate hikes that they're going to do and actually made a comment about where he'd like to see the Fed funds rate at the end of the year. And if you do the quick math on that, that means we likely have a 50 basis point increase in september and 2 25 after that to wrap the year up at between three and a quarter, 3.5. So I think investors really been into that. But I think the Moneyball was when he said, you know, a couple of different answers to questions, you didn't think we're currently in a recession. And, and that likely gave the combination of all those things likely gave investors a good reason to get back into the pool. And they certainly did during the Presser art. Does that set us up for a rally into the end of the year? Of course, a lot does right on this holiday season. And JPMorgan actually has still a very bullish call out that the stock market could set a new record before the end of the year. But of course, we know as the Fed funds rate increases, it historically is not good for the stock market. But if those rates rises do slow, do you think that could set us up for a more favorable environment for investors? I do. I think you know what the investors are looking for now is the Fed to slow a bit, at least slow the pace at which they're raising the Fed funds rate. And we'll likely see that in september and the meetings until the end of the year. And I think the other piece of that is the assumption with the slowing of the pace of increases means you're getting close to that endpoint that terminal rate and that terminal rate may well be 3.5%. The end of the year consensus was the terminal rate was going to be between four and four and a quarter and that's actually pulled back and I think that's pulled back because we've actually seen inflation rolling over on its own accord. We've seen things like gasoline prices down for 44 days in a row crude prices down some 26% from their peaks. Coppers down some uh at a 19 month low and lumber prices are 65% off their peaks inflation you know on its own accord is rolling over. And I think investors look at that combined with Fed that's been pretty steady at the wheel here that perhaps there's more good news in front of us than bad news, especially heading into those two important shopping season at the end of the year, back to school, which will be starting any day now and certainly the holiday shopping season. So I think you know when we when we think about the consumer and how important that is the U. S. Economy, I think they're they're likely going to feel better um than they did at the beginning of the summer. Well let's certainly hope art. And I know the Fed chair pointing out that yes, american households do still have money to spend trillions of dollars accumulated in household savings during the first two years roughly of this pandemic. My next question is can we get a soft landing? Can the U. S. Actually avoid a recession? What do you think? Well, you know, it's it hasn't been done that often and you know the batting average is very very bad for monetary policy tightening and a soft landing. So it is very difficult needle to thread not impossible though. So we're coming at this tightening cycle at a point in which the labor force is the labor sector is, is very tight. Right? So having a tight labor market clearly is going to be a benefit, meaning that while unemployment could go up and hopefully it goes up for the right reasons like the labor force participation rate increasing. We're still not back to pre pandemic levels of labor force participation, But you know, full employment has historically been anything below 5%. So we've got some room between the 3.6% unemployment we have now and seeing unemployment go up, demand destruction happening and and and not necessarily going full throttle into a recession. You know, we don't have a great history of being able to do this, but it's not impossible, especially with the strength in the labor force right now. All right, stay with me. I do want to break in with an earnings alert now because it is a busy news day down here on Wall Street and qualcomm results actually hitting the take those earnings coming in better than expected revenue about in line with expectations. But actually some disappointing a current quarter guidance that revenue estimate below what Wall Street had expected earnings per share guidance that kind of does hug that midline but more to the downside than actually exceeding again, what analysts on Wall Street were anticipating that stock down 3.5%. We talk about some of these bigger names are and certainly these technology companies, they do have an outsized impact on the path forward for the stock market. I know clearly you haven't had a chance to dig into these results. But what might this qualcomm report? Tell us about the overall health of the economy and the stock market. You know, it's interesting. We've had several semiconductor companies report and a couple of them have given upside surprises. Qualcomm beating likely doesn't surprise after we hear texas instruments um, give a better report and they, and they operate in some of the same sectors. Right? Welcomes very much in mobility. Um, I think that one of the drags and likely why the guidance has been pulled down is that they're, they're also um dependent on china for a couple of things and one is supply and the second is demand. Right? So while we continue to have china and there's zero covid lockdown rolling lockdowns that likely is going to affect the next quarter. They're likely already seeing that on both the supply for the things they need and, and, and certainly the china demand. So not shocked that the guidance is like this. And obviously you always want to wait till after the conference call before you really put a nail in the coffin for qualcomm. But you know, very happy to see that they very much like texas instruments were able to be. Yeah, the stock at 250 bucks per share after hours, about 43 bucks below its 52 week high but still holding in there, it was up 2.3% today art. Let's turn back to the major indexes meta gonna report after the close as well. Advertising span, I think a key focus for some of these large technology names that's for sure. If we can avoid a recession, that would be a positive. Even though we're already starting to see based on earlier reports, some trepidation in the ad spend market collectively. What are you seeing come from this earning season? And do you think things will get better or worse after corporate America from here? Well, I'll tell you this, we certainly have seen that there are haves and have nots. Right. So you know, in in the, in the case of companies that actually have higher end exposure, they certainly seem to have done better. So where we see the lower end exposure, like a walmart and a target having to warn here, it's really showing that, you know, these inflationary pressures are, you know, for obvious reasons, adversely affecting the lower end consumer, the higher end consumer continues to be um, pretty confident and pretty busy out there. So that's one piece of the puzzle. The other piece of the puzzle I think is especially in the case of alphabet and Microsoft is we have actually done a very efficient job of pricing and some bad news, you know, coming into this earnings reporting season, there was all the talk, it was a very popular narrative to say that this was going to be the earnings apocalypse and it was going to be terrible and estimates were too high and guidance was going to come down across the board and we actually haven't necessarily seen that. And you know, in the case of both Microsoft and alphabet, um today it showed that yes, we knew that the number is gonna be tough. But you know what, that's a lot better than we thought they could be so better than feared. Clearly seems to be the mantra for this earnings reporting season. I think if you're able to hit your top and bottom line and even if you keep your guidance unchanged, um, you're, you're gonna be in a place where you're gonna be rewarded. I think that's gonna be the case next week when earning season is even busier than it was this week.