Stocks rise as investors await key Fed decision, Microsoft and Alphabet pop after earnings

U.S. equities climbed Wednesday, boosted by strong gains from Google-parent Alphabet and Microsoft, as traders awaited the Federal Reserve's latest interest rate decision, scheduled for later in the day.

The Dow Jones Industrial Average rose by 109 points, or 0.4%. The S&P 500 gained 1.2%, and the Nasdaq Composite increased 2.3%.

Alphabet shares rose 5% after the tech giant's quarterly report showed strong revenue from Google's search business. That said, the company's overall earnings and revenue came in below expectations.

Microsoft also posted earnings and revenue below analyst estimates but reported a 40% jump in revenue growth for Azure and cloud services. Shares popped 5%.

"Earnings growth estimates continue to slip, even for the technology sector, which typically holds up relatively well during economic slowdowns," Sam Stovall, chief investment strategist at CFRA Research, told CNBC. "Pressure from a pullback in consumer spending likely contributed to EPS/sales shortfalls, as all measures of consumer confidence have deteriorated sharply from peaks around mid-2021."

Enphase Energy also popped on the back of its latest results, trading about 15% higher. Chipotle also added 13% following its mixed second-quarter earnings release.

Boeing rose about 2% even though its second-quarter results fell short of analysts' estimates. The company posted positive operating cash flow and stuck to its forecast to return to free cash flow this year.

There are more major earnings reports to come. On Wednesday, Qualcomm, Ford and Meta Platforms will report at the end of the day.

More than 150 S&P 500 companies have reported calendar second-quarter earnings thus far. Of those names, roughly 70% have beaten analyst expectations, FactSet data shows.

Traders are also awaiting a key announcement from the Federal Reserve. The central bank will announce its latest interest rate decision on Wednesday afternoon. Markets widely expect a three-quarter percentage point increase in the benchmark rate.

Investors are also eager to learn more about the path for interest rates going forward as they worry that the central bank's efforts to bring inflation down will push the economy into a recession – which many regard as two consecutive quarters of negative GDP readings. However, the National Bureau of Economic Research, the official arbiter of recessions, uses multiple other factors to determine one. Second quarter GDP data is due out Thursday.

"With so many moving parts to consider, we expect markets to remain volatile after the FOMC meeting," wrote Mark Haefele of UBS Global Wealth Management. "With the markets anticipating a 3.3% fed funds rate by year-end, this means that after this week's meeting, there may be around 100bps of rate hikes by end-December. But the pace of hikes remains uncertain."