U.S. stocks closed higher across the board on Wednesday as investors digested the Federal Reserve's latest interest rate decision and awaited earnings from major technology companies.
The Dow Jones Industrial Average rose 97.53 points, or 0.19%, to 52,475.10. The Nasdaq Composite gained 0.27% to 26,549.85, while the S&P 500 added 0.28% to close at 7,743.98.
Earnings from Alphabet and Microsoft
Google parent Alphabet (NASDAQ: GOOGL) reported third-quarter revenue of $128.6 billion, up 24.9% year-over-year, beating analyst estimates of $128.2 billion. Net income came in at $37.33 billion, up 6.73% from a year earlier. However, shares fell about 9% in after-hours trading as massive AI spending accelerated cash burn.
Google Cloud quarterly revenue reached $21.05 billion, up 41% year-over-year, a notable acceleration from 32% growth in the prior quarter. The cloud unit's growth was driven primarily by strong performance in Google Cloud Platform (GCP), with AI infrastructure and generative AI solutions contributing significantly.
Alphabet raised its full-year 2026 capital expenditure guidance to $125 billion to $130 billion, up from its previous range of $120 billion to $125 billion. The company also said capital spending will "increase significantly" in 2027.
Microsoft (NASDAQ: MSFT) beat analyst expectations on both revenue and profit, largely thanks to robust cloud growth. Shares rose about 4% in after-hours trading following the earnings release.
Microsoft's third-quarter total revenue grew 19% year-over-year to $92.28 billion, 1.8% above analyst estimates. Operating profit rose 21% to $45.92 billion, beating expectations by 5.4%. Cloud revenue increased 30% year-over-year to $63.9 billion, 3.7% above market expectations, while revenue growth for cloud computing platform Azure reached 48% year-over-year, accelerating from 43% in the previous quarter and exceeding the analyst consensus of 44.8%. Azure revenue surpassed $30 billion for the quarter, about 3% above the roughly $32.2 billion market estimate.
Microsoft's third-quarter cash capital expenditure totaled $39.367 billion, up 103% year-over-year but well below the $45.93 billion analysts had expected. Free cash flow was approximately $18.633 billion, down about 27% from roughly $25.663 billion a year earlier.
Market Overview
The Federal Reserve held its benchmark interest rate steady in the 3.75% to 4% target range. Fed Chair Warsh said at a press conference that despite pausing rate hikes, the central bank remains focused on "price stability" and that employment conditions are "quite positive."
Long-term Treasury yields climbed, with the benchmark 10-year note rising 5.2 basis points to 5.044% and the 30-year bond adding 5.6 basis points to 5.360%. According to the CME FedWatch tool, financial markets now price an 85.0% probability of a 25-basis-point rate hike at the Fed's December meeting, up from 78.3% on Tuesday.
Jeff Schulze, chief investment strategist at the Franklin Templeton Investment Institute, said: "Today's decision does not rule out another 25-basis-point hike before year-end. The key question for markets is the pace of tightening, and the committee appears willing to unwind last year's rate cuts at a steady pace, which has historically been more favorable for risk assets."
Tensions in the Middle East carry escalation risks. According to reports, the United States has told several Gulf states to prepare for a possible short but intense military operation after the U.S. midterm elections. The U.S. military is moving a Patriot air defense system from Texas to bolster its air defense capabilities and relocating troops from bases potentially exposed to Iranian fire. These signs suggest the U.S. and Israel are preparing for a new round of strikes against Iran. In response to the reports, the White House said it would not comment on "sensitive military plans that may or may not exist," adding that "President Trump keeps all options on the table."
In recent weeks, technology stocks, particularly companies involved in AI buildouts, have struggled due to financing concerns. Bill Northey, investment director at U.S. Bancorp Asset Management, said: "The near-term cycle remains very healthy. The key is whether it can remain sustainable over multiple years and what the returns on the massive investments being made will be. Will it be broadly profitable, or will there be winners and losers? We lean toward the latter."
Notable Stock Moves
Among prominent tech names, decliners outnumbered advancers, with only Alphabet and Amazon gaining while Nvidia and Meta each fell more than 1%. The Philadelphia Semiconductor Index rose more than 2%, notching a fourth straight daily gain. Boosted by SK hynix (NASDAQ: SKHY) reporting record quarterly profit, shares of the South Korean chipmaker surged 13% in U.S. trading. Micron Technology climbed nearly 6%, Arm Holdings rose 4%, and Marvell Technology and AMD each gained 3%.
The optical communications sector strengthened, with Lumentum up 5.52%, Corning up 3.88%, and Coherent up 1.61%. Oracle jumped nearly 11% after the company provided fiscal 2030 revenue guidance of $225 billion, implying average annual growth of 35%. The company also said it would limit additional financing to $20 billion between fiscal 2027 and fiscal 2030. Boston Scientific fell 5.8% after cutting its annual profit forecast.
The Nasdaq Golden Dragon China Index dropped 1.83%, with NetEase down 1.44% and JD.com down 0.67%, while Alibaba rose 0.72% and Baidu gained 1.57%.
Commodities
International oil prices stabilized and rebounded, with the front-month WTI crude contract up 2.88% at $102.78 per barrel and the front-month Brent contract up 1.26% at $115.32 per barrel. Affected by the Fed's decision, precious metals markets saw sharp after-hours swings. As of press time, COMEX gold futures for January delivery rose 0.20% to $4,082.73 per ounce, while COMEX silver futures fell 0.76% to $54.10 per ounce.
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