Markets Wrap: Stocks Surge, Apple Defies Doomsayers and Fed Preaches Patience

U.S. stocks extended their recovery Wednesday, as the major indexes approached two-month highs on better than expected earnings and dovish guidance from the Federal Reserve. XRP powered the crypto markets higher after Swift announced it was partnering with a crypto-friendly blockchain startup.

Big Day for Stocks

Stocks opened higher on Wednesday and extended their gains through afternoon trading. The Dow Jones Industrial Average rose by as much as 530 points before paring gains later in the session. It settled up 434.90 points, or 1.8%, at 25,014.86. Twenty-seven of 30 index members reported gains.

The broad S&P 500 Index climbed 1.6% to 2,681.05, with all 11 primary sectors finishing higher. Information technology was the biggest gainer, climbing 3% as a sector. Consumer discretionary shares rose 2.2%.

The technology-focused Nasdaq Composite Index was the best performer percentage-wise. It rose 2.2% to 7,183.08.

Apple’s Earnings Defy Expectations

Apple Inc. (AAPL) was the Dow’s best performer on Wednesday after the iPhone maker defied analysts’ expectations. In the December quarter, Apple reported per-share earnings of $4.18 on revenue of $84.3 billion. Analysts called for an EPS of $4.17 on sales of $83.97 billion.

CNBC’s Jim Cramer said Apple’s doomsayers “didn’t know what to do” when the numbers were announced Tuesday evening. “Analysts had their tails between their legs. They cut and run.”

Many in the investment community were expecting a dismal earnings call after Apple lowered its Q4 guidance earlier this month on weak China sales. While iPhone revenues fell slightly short of expectations, service revenue exceeded forecasts.

Read more: Apple’s Warning Sinks Wall Street.

Apple wasn’t the only positive earnings surprise this week. On Wednesday, fellow Dow blue-chip Boeing Co (BA) reported much stronger than expected results on its top and bottom lines. Semiconductor giant Advanced Micro Devices (AMD) also put up firm results during the most recent quarter.

Fed Pledges Patience

The Federal Reserve concluded its first policy meeting of 2019 by voting to keep interest rates unchanged, a move that was widely expected by the markets. In doing so, the central bank pledged a ‘patient’ approach to normalizing monetary policy while maintaining an “ample” balance sheet. Both talking points soothed investors’ concerns about an aggressive tightening cycle.

“In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,” the central bank said in its official statement.

Fed Chair Jerome Powell said the decision to preach patience had nothing to do with President Trump or any other “political considerations.” In Trump’s view, the Federal Reserve is directly impeding on the nation’s growth through aggressive policy steering.

The central bank’s next policy meeting will be held in March. At this stage, investors don’t foresee any upward adjustment to interest rates this year. In fact, they think that the next move will be to lower rates, according to the Fed Fund futures prices.

Oil Hits Two-Month High

Crude oil notched fresh two-month highs Wednesday, as tensions between the United States and Venezuela threatened to disrupt supplies from the battered socialist country. Meanwhile, U.S. commercial crude inventories rose much less than expected last week as imports fell.

The U.S. Energy Information Administration (EIA) said weekly crude inventories rose by 919,000 barrels in the week ended Jan. 25. Analysts had called for an increase of 3.2 million barrels.

U.S. West Texas Intermediate (WTI) futures climbed 92 cents, or 1.7%, to settle at $54.23 a barrel on the New York Mercantile Exchange. That was its best closing price since late November. Brent crude, the international futures benchmark, climbed 41 cents, or 0.7%, to $61.73 a barrel in London.

XRP Leads Tepid Crypto Rally

The cryptocurrency market notched modest gains Wednesday thanks in large part to a dramatic rally in XRP. The so-called ‘banker’s cryptocurrency’ rose by as much as 11% on news that Swift will begin testing its GPI payments standard using infrastructure from blockchain startup R3.

Swift is the de facto standard for the global banking industry, with more than 11,000 institutions using the service to send and receive international payments. Its partnership with R3 could potentially open new pathways for XRP, which has been piloted on the same platform that Swift is using for GPI payments. More on this story: XRP Leads Crypto Market Recovery Following Quick Burst; Will Altcoins Follow?

The cryptocurrency market cap improved to $115.3 billion on Wednesday after falling to a low of $111 billion earlier in the week.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi