The futures markets are trading slightly in the red today, following weaker-than-expected earnings from several large companies, and ahead of the Federal Open Market Committee meeting later today. Shares of Dow-30 component Microsoft (MSFT) fell after the close yesterday, as the tech giant reported a slowdown of cloud-based revenue growth. However, shares of other Dow-30 members, such as Boeing (BA) and Coca-Cola (KO), are up in the premarket on good earnings reports. Traders are awaiting the Fed's decision on interest-rate policy and Chairman Jerome Powell's press conference afterward. Most market participants believe that a 25-basis point hike will occur later today. However, the outlook becomes less clear for the months ahead, and investors will look to see what information can be gleaned about the Fed’s decision making processes. Overall, we think the outcomes of today’s press conference will drive trader sentiment in the coming days.
The stock market indexes rose yesterday as a slew of earnings results impacted trading. Several reports i from Dow-30 components were released, such as telecommunications company Verizon (VZ), which maintained its full-year earnings forecast. Meanwhile, multinational-conglomerate 3M Company (MMM) reported a smaller-than-feared loss during its recent quarter. On the other hand, shares of defense and aerospace company RTX Corp. (RTX), formerly known as Raytheon Technologies, fell when it disclosed that it needs to inspect a portion of its installed base of Pratt & Whitney jet engines over the next twelve months, which will likely impact operations in the airline industry as well. Elsewhere, shares of PacWest BanCorp (PACW) were halted several times yesterday, falling in price before news broke that the company would merge with Banc of California (BANC). The merger decision indicates continued stress in the regional banking sector as some lenders face pressure from deposit outflows. Overall, the indices mostly trended higher throughout the day, and the S&P 500 increased 13 points (up 0.28%), the NASDAQ jumped 86 points (up 0.61%), and the Dow Jones Industrial Average rose 27 points (up 0.08%). Market breadth was divided yesterday, favoring neither advancers nor decliners. Materials equities were among the best performers on the day, while REITs were among the worst.
In commodity news, oil prices rose yesterday, following several days of elevating prices due to increased demand from China, which has notably been stockpiling the energy source. Elsewhere, bond yields on U.S. treasuries were mixed, with short-term rates rising and long-term ones falling. The yield curve remains sharply inverted, with short-term interest rates trading well above those with longer durations, which usually portends a coming recession. The Chicago Board Options Exchange Volatility Index, or VIX, more commonly known as the fear index, pulled back yesterday as demand for options protection declined. This index remains not far from the year's lows, suggesting traders are pricing in lower levels of expected stock-price volatility.
Several economic reports will be released in the days ahead. On Thursday, these noteworthy releases will include initial jobless claims, the advance report of U.S. second-quarter GDP, and durable goods for June. On Friday, the core- and non-core personal consumption expenditures Index for June and the University of Michigan's final consumer sentiment index for July are on the docket. Elsewhere, several hundred companies will disclose quarterly earnings reports in the days ahead, including some after today's closing bell. These include Dow-30 components Honeywell (HON), Intel (INTC), McDonald’s (MCD), Chevron (CVX), and Proctor & Gamble (PG). Overall, we think most eyes will be on earnings and inflationary data released in the days ahead. - John E. Seibert III
At the time of this article’s writing, the author had a positions in several of the companies mentioned.
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