US Stocks Rise, Caution Ahead of Fed Meeting and Microsoft Results
US stocks rose on Tuesday in a cautious environment ahead of the Federal Reserve meeting and the release of results from some of the largest US companies. Here is what is happening in the stock market.
Fed Meeting Awaited for More Clues on Interest Rates
Markets are on edge ahead of the Federal Reserve’s latest meeting, which is set to start late Tuesday and end Wednesday.
The central bank is expected to leave interest rates unchanged. After June’s benign inflation report, investors will be looking for Fed Chairman Jerome Powell to lay the groundwork for a rate cut in September.
Fed officials have repeatedly stated that they are looking for more evidence that inflation is steadily returning to 2% before cutting rates. However, Powell signaled earlier this month that the Fed may not wait until inflation achieves this target before cutting rates.
Markets have fully priced in a 25 basis point cut in September, with a slight possibility of a nearly 50 basis point reduction, and have priced in 66 basis points of easing by the end of the year.
Microsoft Begins Next Round of Big Tech Results
There are still more key results to digest this week, starting with Microsoft (MSFT), which will release its June quarter results on Tuesday after the bell.
Although the company is expected to post considerable profit growth due to new AI-related products, investors will be paying close attention to rising expenses and whether demand for artificial intelligence will be enough to drive profit.
The increased caution comes after high spending on artificial intelligence and sluggish revenue metrics last week marred strong earnings results from Alphabet (GOOGL).
In addition to Microsoft, technology heavyweights Meta Platforms (META) and Apple (AAPL) will release their earnings reports on Wednesday and Thursday, respectively.
Advanced Micro Devices (AMD), Merck (MRK), Procter & Gamble (PG), and Pfizer (PFE) are also due to report results.
Labor Market Data
Several labor market data points will be released this week, starting on Tuesday with job postings for the month of June.
On Friday, July nonfarm payrolls will be released, and are expected to indicate that the US economy added about 177,000 jobs in July, down from 206,000 last month.
The release will be closely scrutinized by investors, who will be looking to see if recent signs of cooling in the labor market continued in July, which could influence when the Federal Reserve begins to cut interest rates.
Crude Oil Prices Fall
Crude oil prices fell on Tuesday, nearing two-month lows, due to concerns about demand in China, the world’s biggest crude importer, as traders ignored the risk of escalating conflict in the Middle East.
Traders dismissed the risk premium in crude oil after media reports indicated that Israeli authorities did not intend to start an all-out war with Lebanon in response to a rocket attack that killed 12 people in the Israeli-occupied Golan Heights.
The Organization of Petroleum Exporting Countries is meeting this week to discuss production levels. However, recent weakness in crude oil could lead the cartel to downplay any plans to cut output.