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Looming Fed Announcement May Lead To Another Choppy Trading Day
US Market
The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to extend the lackluster performance seen in the previous session.
Traders may remain reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement this afternoon.
While the Fed is widely expected to leave its ultra-easy monetary policy unchanged, traders will be looking for any changes to the accompanying statement.
With the economy recovering strongly from the pandemic-induced recession and inflation accelerating, some analysts expect the Fed to begin hinting at tapering its asset purchases at upcoming meetings.
Traders are also digesting the latest earnings news from several big-name companies, including some megacap technology stocks.
Shares of Alphabet (GOOGL) are moving sharply higher in pre-market trading after the Google parent reported better than expected first quarter results and announced a $50 billion stock buyback.
Chipmaker Advanced Micro Devices (AMD) is also likely to see initial strength after reporting first quarter results that exceeded estimates and providing upbeat guidance.
On the other hand, shares of Microsoft (MSFT) are seeing notable pre-market weakness even though the software giant reported better than expected fiscal third quarter results.
Aerospace giant Boeing (BA) may also move to the downside after reporting a wider than expected first quarter loss.
Most major companies have reported better than expected results this earnings season, but the markets have not seen much buying interest in response due to concerns about valuations and whether the results are strong enough to support even further upside.
With traders looking ahead to the Federal Reserve’s monetary policy announcement, stocks showed a lack of direction over the course of the trading day on Tuesday. The major averages spent the day bouncing back and forth across the unchanged line.
The tech-heavy Nasdaq posted a modest loss, slipping 48.56 points or 0.3 percent to 14,090.22, while the Dow and the S&P 500 closed nearly flat. The Dow inched up 3.36 points or less than a tenth of a percent to 33,984.93 and the S&P 500 edged down 0.90 points or less than a tenth of a percent to 4,186.72.
The choppy trading on Wall Street came as many traders stuck to the sidelines ahead of the Federal Reserve’s latest monetary policy decision.
A mixed reaction to the latest earnings news also contributed to the lackluster performance, with several big-name companies also reporting their quarterly results after the close of trading.
Shares of Tesla (TSLA) moved sharply lower even though the electric car maker reported better than expected first quarter results.
Conglomerates General Electric (GE) and 3M (MMM) also moved to the downside despite reporting first quarter earnings that beat expectations.
On the other hand, shares of UPS (UPS) spiked after the delivery giant reported first quarter results that exceeded analyst estimates on both the top and bottom lines.
In U.S. economic news, the Conference Board released a report showing consumer confidence reached its highest level since February of 2020 in the month of April.
The Conference Board said its consumer confidence index jumped to 121.7 in April after spiking to a revised 109.0 in March.
Economists had expected the consumer confidence index to rise to 112.0 from the 109.7 originally reported for the previous month.
Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.
Gold stocks showed a substantial move to the downside, however, with the NYSE Arca Gold Bugs Index tumbling by 2.3 percent. The sell-off by gold stocks came amid a modest decrease by the price of the precious metal.
On the other hand, oil stocks turned in a strong performance on the day, resulting in a 1.6 percent advance by the NYSE Arca Oil Index. The rally by oil stocks came amid a sharp increase by the price of crude oil.
U.S. Economic Reports
The Energy Information Administration is scheduled to release its report on oil inventories in the week ended April 24th at 10:30 am ET.
Crude oil inventories are expected to rise by 0.4 million barrels after climbing by 0.6 million barrels in the previous week.
At 2 pm ET, the Federal Reserve is scheduled to announce its latest monetary policy decision, followed by Fed Chari Jerome Powell’s post-meeting press conference at 2:30 pm ET.
Stocks in Focus
Shares of Pinterest (PINS) are moving sharply lower in pre-market trading after the image sharing service reported better than expected first quarter earnings in revenues but a slowdown in user growth.
Music streaming service Spotify (SPOT) may also come under pressure after reporting a narrower than expected first quarter loss but provided disappointing guidance for the current quarter.
On the other hand, shares of Shopify (SHOP) are likely to see initial strength after the e-commerce company reported first quarter results that beat analyst estimates on both the top and bottom lines.
Networking company Juniper Networks (JNPR) may also move to the upside after reporting better than expected first quarter results.
Europe
European stocks have risen on Wednesday as investors cheer a batch of strong earnings and await policy cues from the Federal Reserve later in the day.
While the French CAC 40 Index has climbed by 0.6 percent, the U.K.’s FTSE 100 Index is up by 0.5 percent and the German DAX Index is up by 0.4 percent.
Deutsche Bank has soared as the lender reported its strongest quarterly profits in seven years despite headwinds from restructuring and the coronavirus pandemic.
Lloyds Banking Group has also surged higher after reporting a better than expected profit and raising full-year profitability guidance.
Persimmon has also advanced. The homebuilder said it was experiencing good demand for newly built homes across the U.K.
Grafton has also spiked. The builders merchant and DIY retailer said it expects adjusted operating profit for the current financial year to be between 15 and 20 percent ahead of consensus forecasts.
Advertising group WPP has also rallied after it reported a surprise return to comparable net sales growth for the first quarter of 2021.
Delivery Hero shares have also jumped. The online food ordering company said it expects revenues to more than double in 2021.
Home appliances giant Electrolux has also moved to the upside after it posted a forecast-beating first quarter net profit.
Meanwhile, Lysol maker Reckitt Benckiser Group has dropped despite the company reporting a higher than expected jump in quarterly sales and backing its full-year outlook.
Puma has also slumped. After reporting strong first quarter sales, the sportswear company noted that “recent political tensions in key markets” are leading to increased uncertainty in the industry.
In economic news, German consumer confidence is set to weaken in May as rising cases of infections and the tightening of the lockdown weigh on consumption, survey results from the market research group GfK showed.
The forward-looking consumer sentiment index fell to -8.8 in May from revised -6.1 in April. The score was forecast to rise to -3.5.
U.K. shop prices continued to decline in April, data from the British Retail Consortium showed. The shop price index dropped 1.3 percent year-on-year in April, following a 2.4 percent decrease in March. Both food and non-food prices declined in April.
France’s consumer confidence remained unchanged in April, defying expectations for an easing, preliminary data from the statistical office INSEE showed.
The consumer confidence index reading was 94.0, the same as in March. Economists had expected 93.0. In February, the score was 91.
Asia
Asian stocks rose slightly in cautious trading on Wednesday as investors awaited the results of the U.S. Federal Open Market Committee meeting later in the day for further insight into the bank’s thinking on inflation and bond purchases.
Investors also awaited U.S. President Joe Biden’s address to a joint session of Congress for clues on further stimulus measures.
Chinese stocks posted modest gains, with the benchmark Shanghai Composite Index ending up 14.46 points, or 0.4 percent, at 3,457.07.
Hong Kong’s Hang Seng Index rose 129.80 points, or 0.5 percent, to 29,071.34. Investors shrugged off official data showing that Hong Kong’s merchandise exports grew at a softer pace in March.
Japanese shares ended slightly higher after data showed the country’s retail sales rose 5.2 percent year-on-year in March, representing the fastest growth in five months. The Nikkei 225 Index edged up 62.08 points, or 0.2 percent, to 29,053.97, while the broader Topix closed 0.3 percent higher at 1,909.06.
Sony rallied 3.1 percent before announcing its fourth quarter results later in the day. Robot maker Fanuc rose 2 percent and air conditioner maker Daikin Industries advanced 2.8 percent. Brokerage Nomura Holdings gained 1.5 percent after releasing its quarterly results.
Australian markets eked out modest gains, led by banks and energy companies. The benchmark S&P/ASX 200 Index rose 30.90 points, or 0.4 percent, to 7,064.70, while the broader All Ordinaries Index ended up 24.50 points, or 0.3 percent, at 7,320.
Woodside Petroleum and Santos rose over 1 percent, tracking gains in oil prices overnight. Viva Energy jumped 3 percent to extend gains from the previous session after the fuel supplier said it is making strong progress on its business recovery program.
Lender Westpac advanced 1.2 percent after it agreed to settle a class action over life insurance launched by Shine Lawyers. The other three big banks rose between half a percent and 1.1 percent on easing concerns of an earlier than expected interest rate hike after quarterly inflation data came in under expectations.
Ansell shares rallied 3.9 percent as the safety products company upgraded its full-year guidance. Gold miner St Barbara plunged 7.9 percent and electronics juggernaut JB Hi-Fi slumped 4 percent after reporting disappointing earnings for the quarter.
Shareholder registry firm Link Administration lost 6.3 percent after a private equity group withdrew its bid for the firm.
Seoul stocks tumbled as Covid-19 worries persisted and U.S. Treasury yields bounced back above the 1.6 percent level on expectations of a faster than expected global recovery from the pandemic. The benchmark Kospi fell 33.95 points, or 1.1 percent, to 3,181.47.
In economic news, consumer confidence in South Korea picked up steam in April, the latest survey from the Bank of Korea showed, with an index score of 102.2, up from 100.7 in March.
Commodities
Crude oil futures are rising $0.46 to $63.40 a barrel after jumping $1.03 to $62.94 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,764.60, down $14.20 compared to the previous session’s close of $11,778.80. On Tuesday, gold edged down $1.30.
On the currency front, the U.S. dollar is trading at 108.94 yen compared to the 108.70 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2071 compared to yesterday’s $1.2091.
