Stocks Waver as Fed Call and AI Earnings Loom: Markets Wrap
(Bloomberg) — Stocks wavered ahead of earnings from two of the world’s biggest spenders on artificial intelligence and a US interest-rate decision where markets still see room for a hike. Brent rallied toward $90 a barrel.
S&P 500 futures were little changed. Those for the Nasdaq 100 fluctuated after the latest selloff in chipmakers left the index on the brink of a technical correction. Oil jumped after a lull in Middle East hostilities came to an abrupt end, sending Treasuries lower. Markets assign about a 35% chance of a Federal Reserve rate increase. The dollar barely budged.
Earnings from Meta Platforms Inc. and Microsoft Corp. arrive as the AI trade is faltering, with traders questioning whether the costly buildout of the technology can deliver adequate returns. While both companies are expected to deliver rapid growth, Wall Street will look for evidence that their outlays are justified.
Chipmakers have also been punished amid doubts over whether lofty margins can be sustained. SK Hynix Inc. plunged nearly 10% in South Korea even after reporting a more than fivefold rise in operating profit, extending a rout that has wiped more than $700 billion off its market value in little more than a month.
“I hope that Meta and Microsoft can confirm the capex spree in the industry and reassure the market about semiconductors,” said Fares Hendi, a portfolio manager at Société de Gestion Prévoir in Paris.
In Europe, the Stoxx 600 swung between gains and losses on a busy day for earnings. The region’s luxury sector saw diverging fortunes for two of its biggest names, with Kering SA rallying after Gucci sales topped estimates and Hermès International SCA getting hit by a lack of growth in China.
Brent rose after President Donald Trump pledged to hit Iran hard in response to Tehran’s attack on the US military in Jordan. The rebound followed a 16% drop in the benchmark over three days as both sides paused a stretch of attacks and counterstrikes.
For stocks, a dovish signal from the Federal Reserve to hold rates at current levels would be “the best outcome,” according to the JPMorgan Market Intelligence team.
Their scenario analysis shows a 28% probability of the central bank keeping rates unchanged, while sounding accommodative on the inflation outlook. That would trigger gains of between 0.5% and 1% in the S&P 500. Their base case, with 50% odds, is for a hawkish hold, where the Fed warns about staying vigilant on inflation.
“It’s really rare to have the market split just hours ahead of a Fed decision,” said Amélie Derambure, a senior multi-asset portfolio manager at Amundi. “That means some investors will necessarily be hurt. A hike could have harsh consequences on equities if it announces a fresh cycle.”
What Bloomberg Strategists Say:
Microsoft and Meta Platforms report earnings after the bell, followed by Samsung Electronics on Thursday; all have the potential to disappoint lofty expectations. But even if they do, recent moves suggest that’s unlikely to morph into a broader market selloff.
— Conor Cooper, Macro Squawk. Click here to read the full analysis.
Corporate News:
Anglo American Plc is discussing a deal worth about $1 billion to sell its De Beers diamond business, just a fraction of what the one-time diamond monopoly was once worth. Biogen Inc. reported quarterly revenue and adjusted earnings that beat analysts’ expectations as sales of newly acquired kidney and eye-disease drugs helped offset declining revenue from multiple sclerosis medicines. BMW AG is offering voluntary severance packages to thousands of its workers in Germany, as the carmaker tries to become leaner to better compete with rivals from China. Deutsche Bank AG’s revenue from fixed-income trading jumped in the second quarter as the unit outperformed most of its US peers. UBS Group AG announced a new $3 billion share buyback program to run until mid-2027, giving investors more clarity on payouts amid ongoing uncertainty over the bank’s future capital requirements. Standard Chartered Plc unveiled a fresh $1 billion share buyback as second-quarter earnings beat expectations, while it booked more charges tied to the conflict in the Middle East. Porsche AG reaffirmed its full-year earnings guidance after first-half profitability rose, offering tentative signs that the sports-car maker’s turnaround is beginning to gain traction. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 8:33 a.m. New York time Nasdaq 100 futures fell 0.2% Futures on the Dow Jones Industrial Average fell 0.7% The Stoxx Europe 600 fell 0.1% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1377 The British pound was little changed at $1.3284 The Japanese yen was little changed at 163.77 per dollar Cryptocurrencies
Bitcoin rose 0.7% to $64,268.18 Ether fell 0.6% to $1,904.57 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.63% Germany’s 10-year yield advanced three basis points to 3.14% Britain’s 10-year yield advanced five basis points to 5.00% Commodities
West Texas Intermediate crude rose 6.6% to $84.51 a barrel Spot gold fell 0.3% to $4,015.65 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani.
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