On Wednesday, there was a gain in US stock indexes futures as investors calmed down after better-than-expected earnings reports were presented by technology firms Alphabet and Microsoft, just ahead of an important interest rate decision from the Fed.
Sentiment improves
The results from the tech giants gave sentiment a boost after markets had declined sharply on Tuesday because of weak data about consumer confidence and the US retailer Walmart’s profit warning.
On Wednesday, premarket trading saw a 3.8% rise in Microsoft Corp after it forecast that this fiscal year would see revenue growth in double digits, thanks to the demand for its cloud computing services.
Fears of a sharp slowdown in the ad market had risen last week after the warning from social media company Snap Inc. However, there was some relief thanks to Alphabet Inc., which posted better-than-expected sales in terms of Google search ads, giving its shares a lift of 3.5%.
Market analysts said that considering the negative sentiment that has been surrounding the broader tech market, a positive reaction to the latest earnings reports is definitely a good sign.
Growth stocks
Other high-growth stocks also saw their shares get a boost due to the positive news, which includes Apple Inc. Meta Platforms Inc. and Amazon.com Inc., all of which are scheduled to post their own quarterly results this week.
This year has seen these growth stocks take a beating, as the US Federal Reserve has been hiking interest rates rather aggressively in order to curb inflation that has reached decade highs.
When interest rates rise, the future cash flows used for determining the valuation of these companies are heavily discounted.
Interest rate increase
It is widely expected that the US Fed will announce an interest rate hike of 75 basis points on Wednesday when its two-day policy meeting comes to an end.
The focus is expected to shift to whether its policymakers have been able to see the deep signs that point to a slowdown in the economy.
As a matter of fact, money market traders have even priced in a one-in-four chance that a 100 basis points increase from the Fed would be announced.
The decision from the US central bank is scheduled for the announcement at 2:00 pm ETC and Jerome Powell, the Fed’s chairman, will conduct a news conference half an hour later.
He is expected to elaborate on how the latest economic data has been perceived by the central bank and give hints about the next steps. Market analysts said that earnings will take a backseat today, as the FOMC meeting will take the spotlight, particularly if the Fed turns out to be more hawkish than the market expects.
There was a 0.43% rise in Dow e-minis, which rose by 136 points, while a 0.89% gain in S&P 500 e-minis took them up by 34.75 points and a 1.45% rise saw Nasdaq 100 e-minis rise by 175.25 points.
A 5.7% rise in PayPal Holdings Inc. was also seen after a report said that Elliot Investment Management was increasing its stake in the company.