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

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.

Alphabet
GOOGL
and Microsoft
MSFT
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
BA
and, after the market close, Facebook parent company Meta Platforms
META
META.

“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. 
  BA
  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
  V’s
  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.
  KHC
  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.
  CMG
  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.
  TXN
  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
  BX:TMUBMUSD10Y
   declined 1.9 basis points to 2.787%.

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

• The U.S. oil benchmark 
  CL
  gained 0.9% to $95.83 a barrel on the New York Mercantile Exchange, while gold futures 
  GC00
  edged up 0.2%.

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

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