Stock futures remained relatively unchanged on Tuesday night as investors analyzed the latest earnings reports and prepared for the Federal Reserve’s monetary policy decision scheduled for Wednesday afternoon. Futures tied to the broad index experienced a marginal loss of 0.1%, while futures tied to the S&P 500 ticked slightly higher by 0.2%. Conversely, futures tied to the Dow Jones Industrial Average dropped 164 points, or 0.4%.
Shares of a prominent cloud business witnessed a decline of around 4% on Wall Street, while another company’s stock climbed more than 7% following positive second-quarter results. Additionally, an artificial intelligence darling experienced a more than 4% increase in its stock price, largely driven by AMD’s report. These market movements followed a day of rotation out of megacap technology names, resulting in a 1.3% decline in the tech-heavy Nasdaq. The broader market also slipped by 0.5%, primarily due to the underperformance of information technology stocks. However, the blue-chip index bucked the trend, adding 0.5% to its value. Small-cap stocks continued to attract investors, with the Russell 2000 outperforming and rising approximately 0.4%.
All eyes are now focused on the Federal Reserve’s policy meeting, which concludes on Wednesday with an announcement regarding interest rates, followed by a press conference featuring Chair Jerome Powell. According to Fed funds futures, there is a strong likelihood that rates will remain steady within the 5.25% to 5.5% range. However, traders will be closely monitoring Powell’s remarks for any indications of a potential rate cut in September. Investors are expecting a clear signal in this regard, although the Fed may be cautious in sounding overly confident about future rate cuts to avoid raising questions about why they are not cutting rates immediately. Consequently, there is a possibility of disappointment among investors regarding the tone and posture of the Fed meeting.
Ahead of the Fed’s announcement, traders will also be keeping an eye on economic data, including private payrolls, employment costs, and pending home sales figures. Additionally, corporate earnings releases from several companies, including those from before the bell and after the market closes, will be closely watched. These earnings reports could potentially serve as the final catalysts in what has been a volatile month for the market. As of now, the S&P 500 and Nasdaq are on track to end July with declines of 0.4% and 3.3%, respectively. On the other hand, the Dow and Russell 2000 are expected to finish the month with gains of over 4% and 9%, respectively, highlighting the boost provided by the market rotation towards smaller, more cyclically oriented stocks.
Wells Fargo analyst Christopher Harvey is particularly interested in observing whether concerns about the health of the consumer extend to higher income brackets. He noted that reports thus far have expressed worries about the state of the consumer in general. While earnings from listed companies have surpassed expectations, the rate of sales beats has been deemed “disappointing,” and commentary regarding customers has largely been negative.