U.S. stock futures bounce back ahead of Fed decision as investors give a pass to earnings misses from Alphabet and Microsoft

U.S. stocks open higher ahead of Fed decision, investors give a pass to earnings misses from Alphabet and Microsoft

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U.S. stock indexes opened higher Wednesday, ahead of a Federal Reserve interest rate decision while investors digested earnings reports from some of the biggest S&P 500 index companies.

What’s happening
  • The Dow Jones Industrial Average
     rose 135 points, or 0.4% to 31,892.

  • The S&P 500
     gained 34 points, or 0.8%, to 3,953.

  • The Nasdaq Composite 
     advanced 162 points, or 1.4% to 11,723

On Tuesday, the Dow Jones Industrial Average fell 229 points, or 0.71%, to 31762, the S&P 500 declined 46 points, or 1.15%, to 3921, and the Nasdaq Composite dropped 220 points, or 1.87%, to 11563. Walmart’s
profit warning helped set the tone for a down day on Wall Street.

What’s driving markets

The Fed decision is due at 2 p.m. Eastern, with a press conference from Fed Chair Jerome Powell at 2:30 p.m. Expectations are for a 75 basis point interest rate hike, but there’s uncertainty on what the Fed’s message will be, and whether it lines up a policy pivot after a string of negative economic surveys from both companies and consumers.

Tim Duy, chief U.S. economist at SGH Macro Advisors, says the central bank will want to send a hawkish message but might find it hard to accomplish.

“The easy path to sending that message is to set up another 75bp hike in September, but I don’t think the Fed will do that if, as I suspect, the goal is to reduce the level of guidance while creating a hawkish path that does not require an additional super-sized hike,” said Duy. “It might be a tricky space to navigate; we have always said the Fed will face a communications challenge when it comes time to set the stage for stepping down from 75 bp.”

Meanwhile investors are digesting second quarter earnings reports. 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.

and Microsoft
each missed earnings expectations in their reports Tuesday night, though shares of both were up on the market open Wednesday as they both posted quarterly revenue growth. Among the wave of companies reporting results on Wednesday are plane maker Boeing
and, after the market close, Facebook parent company Meta Platforms

“Solid reports from tech giants Microsoft and Alphabet have given a fresh boost to market sentiment on Wednesday, sparking hopes that companies can handle tighter monetary conditions and a slower economy,” said Pierre Veyret, technical analyst at ActivTrades.

See: Google and Microsoft earnings show the bar has been lowered for Big Tech

Also in Washington, the Senate is expected to vote on a bill to boost U.S. semiconductor production.

In U.S. economic data, durable-goods orders jumped 1.9% in June. That was largely due to more bookings for new cars and trucks, but there were hints of weakness among other manufacturers. Economists polled by the Wall Street Journal had forecast a 0.4% decline in new orders for products meant to last at least three years.

Companies in focus
  • Boeing Co. 
    stock rose 2.8% Wednesday, after the aerospace and defense company reported a wider-than-expected second-quarter loss and missed on revenue, but beat free cash flow (FCF) forecasts by a wide margin.

  • Visa Inc
    shares dropped 1.1% Wednesday, despite that the company topped expectations with its latest results Tuesday and gave an upbeat signal to investors about the resilience of spending volumes in the current macroeconomic climate.

  • Kraft Heinz Co.
    shares declined 6% in premarket trading Wednesday, after the company reported second-quarter net income of $265 million, or 21 cents per share, after a loss of $27 million, or 2 cents per share, last year. 

  • Shares of Chipotle Mexican Grill Inc.
    rallied 9.7% in pre-market trading Wednesday after the fast-casual restaurant chain beat Wall Street’s quarterly expectations as menu price increases took out some of the sting from rising costs it faced.

  • Texas Instruments Inc.
    shares rose 4.2% in premarket trading Wednesday after the chip maker reported a big earnings beat for the quarter and an outlook that was mostly above Wall Street estimates.

Other assets
  • The yield on the 10-year Treasury note
     declined 1.9 basis points to 2.787%.

  • The ICE U.S. Dollar Index
    a measure of the currency against a basket of six major rivals, was down 0.2%.

  • The U.S. oil benchmark 
    gained 0.9% to $95.83 a barrel on the New York Mercantile Exchange, while gold futures 
    edged up 0.2%.

  • The Stoxx Europe 600 
    gained 0.4% and London’s FTSE 100 UKX, 0.61% rose 0.6%

  • The Shanghai Composite 
     ended 0.1% lower, while the Hang Seng Index 
     lost 1.1% in Hong Kong and Japan’s Nikkei 225 NIK, +0.22% gained 0.2%.

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