US Stocks and equity futures rally ahead of Federal Reserve monetary policy meeting

Major tech and internet stocks advanced in premarket trading after reassuring reports from Alphabet, Microsoft and Texas Instruments.

US Stocks, equity futures, Nasdaq, Federal Reserve, rate hike, inflation
Investors are bracing for the busiest reporting day of the season and a slew of macro-economic data on Thursday.

Bloomberg: Stocks and US equity futures rallied Wednesday as a batch of resilient company earnings helped alleviate some of the wider caution in markets ahead of a pivotal Federal Reserve monetary-policy meeting.

Contracts on the technology-heavy Nasdaq 100 led gains as major tech and internet stocks advanced in premarket trading after reassuring reports from Alphabet Inc., Microsoft Corp. and Texas Instruments Inc. European stocks also rose, with the banking sector up even as Credit Suisse Group AG posted a larger-than-expected loss and Deutsche Bank AG warned on costs.

The mood remains edgy ahead of a much-anticipated Fed interest-rate increase — part of a global wave of monetary tightening to quell inflation that’s stoking concerns about a worldwide economic slowdown. Investors are bracing for the busiest reporting day of the season and a slew of macro-economic data on Thursday.

Orders placed with US factories for durable goods rose unexpectedly in June, fueled by a surge in defense aircraft and pointing to sustained demand for equipment despite rising interest rates.

Italian bonds fell after S&P Global Ratings lowered the nation’s outlook to stable from positive. The dollar and Treasury yields slipped, while oil and European natural gas prices extended gains.

Among individual stock moves, Shopify Inc. slumped in premarket trading after the company kicked off earnings season for e-commerce firms with a result that missed analysts’ estimates and said the outlook is getting worse.

In Europe, Credit Suisse shares gained as the bank replaced its embattled chief executive officer and said it would embark on a new turnaround plan, while Deutsche Bank fell after it scrapped an efficiency target for the year and warned a key profitability goal was getting harder to reach.

UniCredit SpA shares soared about 7% after posting second-quarter profit that almost doubled analyst expectations and lifted its full-year target in anticipation of further gains from rising interest rates in Europe.

The projected 75 basis-point Fed move to tackle price pressures would cement the steepest two-month rise in rates since the 1980s. The key question is whether Chair Jerome Powell’s policy signals validate or refute scaled-back bets projecting a 3.4% peak fed funds rate around year-end and cuts in 2023 to shore up an economy at risk of recession.

“The Fed hasn’t even gotten to neutral yet,” Jason England, global bonds portfolio manager at Janus Henderson Investors, said on Bloomberg Television. “For them to start easing already or for them to start seeing eases priced in is, I think, a little premature.”

IMF Warning
Meanwhile, the European Central Bank will deliver only 50 basis points of additional interest rate increases this year as the euro zone succumbs to a recession in the fourth quarter, according to JPMorgan Chase & Co.

Monetary tightening, Europe’s energy woes amid Russia’s invasion of Ukraine and challenges from China’s property sector and Covid are among the risks darkening the global outlook. The International Monetary Fund warned the world economy may soon be on the cusp of an outright recession, while Goldman Sachs Group Inc. said the euro area is probably already contracting.

US company earnings are providing a sliver of hope — more than three-quarters of firms that have reported so far either beat or met expectations. But there are doubts about how long they can weather economic challenges.

“Inflation is hurting companies and the question is whether these policy rate hikes are going to do anything to alleviate the pain,” Quadratic Capital Management founder Nancy Davis said on Bloomberg Television.

Elsewhere, President Joe Biden will speak with Chinese leader Xi Jinping on Thursday amid fresh tensions over Taiwan. The White House is also considering whether to lift some tariffs on Chinese imports to stem inflation.

Here are some key events to watch this week:

Apple, Amazon, Meta earnings due this week
Fed policy decision, briefing, Wednesday
Australia CPI, Wednesday
US GDP, Thursday
Euro-area CPI, Friday
US PCE deflator, personal income, University of Michigan consumer sentiment, Friday
Musk, Tesla and Twitter are this week’s theme of the MLIV Pulse survey. Also share your views on the S&P 500’s biggest stocks.

Some of the main moves in markets:

Stocks

Futures on the S&P 500 rose 0.9% as of 8:35 a.m. New York time
Futures on the Nasdaq 100 rose 1.4%
Futures on the Dow Jones Industrial Average rose 0.5%
The Stoxx Europe 600 rose 0.5%
The MSCI World index fell 0.9%

Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.3% to $1.0150
The British pound rose 0.2% to $1.2055
The Japanese yen was little changed at 136.87 per dollar

Bonds
The yield on 10-year Treasuries declined one basis point to 2.79%
Germany’s 10-year yield advanced three basis points to 0.96%
Britain’s 10-year yield advanced six basis points to 1.97%

Commodities
West Texas Intermediate crude rose 1% to $95.94 a barrel
Gold futures rose 0.2% to $1,738.80 an ounce

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