Upbeat Earnings News May Spark Early Rally On Wall Street

The major U.S. index futures are currently pointing to sharply higher on Wall Street on Wednesday, with stocks likely to see an early rally following the mixed performance seen in the previous session.

Stocks may benefit from a positive reaction to some of the latest corporate earnings news from companies like Advanced Micro Devices (AMD).

Shares of AMD are surging by 7.9 percent in pre-market trading after the chipmaker reported second quarter results that exceeded analyst estimates on both the top and bottom lines.

Coffee giant Starbucks (SBUX) is also seeing significant pre-market strength after reporting fiscal third quarter earnings in line with estimates and maintaining its full-year guidance.

Shares of DuPont (DD) have also surged in pre-market trading after the chemical giant reported better than expected second quarter results.

On the other hand, shares of Microsoft (MSFT) may move to the downside after the tech giant reported quarterly earnings and revenue that beat expectations but disappointing cloud computing results.

The upward momentum on Wall Street also comes as traders look ahead to the Federal Reserve’s monetary policy announcement this afternoon.

The Fed is widely expected to leave interest rates unchanged, but the accompanying statement could have a significant impact on the outlook for the central bank’s next decision in September.

With Fed officials repeatedly saying they need “greater confidence” inflation is slowing before cutting rates, recent inflation data has led to optimism about a September rate cut.

According to CME Group’s FedWatch Tool, there is currently an 87.7 percent chance the Fed will lower rates by a quarter point in September and an 11.9 percent chance of a half point rate cut.

After ending Monday’s choppy trading session narrowly mixed, the major U.S. stock indexes moved in more starkly opposite directions during trading on Tuesday. While the tech-heavy Nasdaq moved sharply lower, the Dow ended the day firmly positive.

The Nasdaq tumbled 222.78 points or 1.3 percent to 17,147.41, ending the session at its lowest closing level in well over a month. The S&P 500 also fell 27.10 points or 0.5 percent to 5,436.44, while the narrower Dow climbed 203.40 points or 0.5 percent to 40,743.33.

The steep drop by the Nasdaq came as tech stocks came under pressure as the day progressed, with AI darling and sector leader Nvidia (NVDA) plunging by 7.0 percent to a two-month closing low.

Microsoft (MSFT) and Advanced Micro Devices (AMD) also moved to the downside ahead of the release of their quarterly results after the close of today’s trading.

The weakness in the sector may have reflected concerns the earnings won’t be strong enough to support further upside after tech stocks helped lead the markets to record highs earlier this month.

Among tech stocks, semiconductor stocks turned in some of the worst performances, resulting in a 3.9 percent nosedive by the Philadelphia Semiconductor Index. The index slumped to its lowest closing level in well over two months.

Shares of Lattice Semiconductor (LSCC) plummeted by 9.4 after the chipmaker reported weaker than expected second quarter results and provided disappointing third quarter revenue guidance.

Computer hardware are saw significant weakness on the day, dragging the NYSE Arca Computer Hardware Index down by 2.2 percent.

On the other hand, telecom stocks showed a substantial move to the upside, driving the NYSE Arca North American Telecom Index up by 3.5 percent.

Network solutions provider Lumen Technologies (LUMN) helped lead the telecom sector higher, skyrocketing by 37.6 percent.

Airline stocks also moved sharply higher on the day, with the NYSE Arca Airline Index soaring by 2.8 percent. Shares of JetBlue (JBLU) spiked by 12.3 percent after the airline reported an unexpected second quarter profit on better than expected revenues.

Meanwhile, the advance by the Dow comes despite a steep drop by shares of Merck (MRK), with the drug giant plummeting by 9.8 percent.

The sell-off by Merck came after the company reported better than expected second quarter results but provided disappointing full-year earnings guidance.

Shares of Procter & Gamble (PG) also plunged by 4.8 percent after the consumer products giant reported second quarter earnings that beat analyst estimates but weaker than expected revenues.

At the same time, Dow components Travelers (TRV) Goldman Sachs (GS) and JPMorgan (JPM) posted strong gains on the day.

Commodity, Currency Markets

Crude oil futures are spiking $2.52 to $77.25 a barrel after tumbling $1.08 to $74.73 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,466.20, up $14.30 compared to the previous session’s close of $2,451.90. On Tuesday, gold surged $26.40.

On the currency front, the U.S. dollar is trading at 150.14 yen compared to the 152.77 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0837 compared to yesterday’s $1.0815.

Asia

Asian stocks climbed on Wednesday, while the yen turned volatile after the Bank of Japan lifted short-term policy rates and announced plans to reduce monthly bond buying in a hawkish pivot.

Meanwhile, weak manufacturing data from China added to bets that Beijing will deploy more stimulus measures in the world’s second largest economy.

Investors also assessed mixed earnings results from Microsoft and chipmaker AMD and looked ahead to a Federal Reserve announcement for greater clarity regarding when the U.S. central bank will begin cutting interest rates.

Bond yields and the dollar were little changed in Asian trading, while gold ticked higher and oil prices rebounded from seven-week lows on escalating tension in the Middle East.

Media reports suggested that Ismail Haniyeh, the head of Hamas’s political wing, was killed in Iran.

China’s Shanghai Composite Index rallied 2.1 percent to 2,938.75 after a Politburo meeting pledged to tilt stimulus towards consumers.

Hong Kong’s Hang Seng Index surged 2.0 percent to 17,344.60, as a measure of Chinese manufacturing activity slipped to a five-month low in July, fueling expectations for more Chinese stimulus.

Japanese markets rallied after the country’s central bank hiked its key interest rate to 0.25 percent in a surprise move and laid out a detailed plan to pare monthly bond buying in stages.

The Nikkei 225 Index jumped 1.5 percent to 39,101.82, while the broader Topix Index settled 1.5 percent higher at 2,794.26.

Tokyo Electron surged 7.4 percent and Advantest climbed 4.5 percent after Reuters reported the Biden administration planned to exempt chip equipment makers from Japan, the Netherlands and South Korea from upcoming export restrictions.

In economic news, Japanese retail sales rose 3.7 percent in June from a year earlier, while factory output dropped in the month, separate reports showed today.

Seoul stocks closed higher on bets the Fed may begin its rate cutting cycle this year. The Kospi rose 1.2 percent to 2,770.69 ahead of the Fed’s policy decision.

Investors shrugged off data that showed Korean industrial output dipped for the second consecutive month in June despite strong semiconductor production.

SK Hynix gained more than 3 percent ahead of earnings results of big tech firms, such as Apple Inc. and Amazon.

Australian markets posted strong gains as a soft inflation report eased pressure on the Reserve Bank of Australia to raise interest rates again.

The benchmark S&P ASX 200 Index jumped 1.8 percent to 8,092.30, marking another record high. The broader All Ordinaries Index gained 1.8 percent to finish at 8,320.40, with buying seen across the board.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index edged up 0.1 percent to 12,405.27.

Europe

European stocks have advanced on Wednesday, with Chinese stimulus hopes and encouraging earnings boosting investor sentiment ahead of the Federal Reserve’s interest rate decision later in the day.

A measure of Chinese manufacturing activity slipped to a five-month nadir in July, fueling expectations for more Chinese stimulus.

Meanwhile, headline annual inflation in the euro zone unexpectedly rose to 2.6 percent in July from 2.5 percent in June, according to Eurostat’s flash estimate.

While the German DAX Index has climbed by 0.6 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both up by 1.2 percent.

In corporate news, ASML rallied 5.5 percent after Reuters reported the Biden administration planned to exempt chip equipment makers from Japan, the Netherlands and South Korea from upcoming export restrictions.

HSBC Holdings jumped 4 percent in London. The lender announced a share buyback of up to $3 billion after reporting a stable first-half profit.

Mining firm Ferrexpo soared 12 percent after half-year profits more than doubled.

Ricardo climbed 4 percent. The engineering and environmental consulting firm reported trading in line with expectations for FY23/24.

Commercial landlord Shaftesbury Capital added 2.2 percent on reporting robust business performance in its interim results.

Taylor Wimpey rose 1.3 percent. The real estate group has raised its outlook for house sales this year to the top end of a previous guidance.

Pharma giant GSK fell 1.5 percent after its second-quarter profit attributable to shareholders fell to 1.17 billion pounds from last year’s 1.62 billion pounds.

Yogurt maker Danone jumped 4.4 percent in Paris after revenue rose more than expected in the second quarter.

Airbus, the world’s largest plane maker, surged 3.3 percent while jet engine and equipment maker Safran fell 1.6 percent after reporting their half-year results.

Schneider Electric, a global leader in energy management and automation, gained nearly 3 percent after reporting better-than-expected H1 earnings and raising its outlook.

Adidas added 1 percent. The German sportswear giant confirmed its preliminary second-quarter figures and backed its sales and earnings guidance for the year.

Healthcare group Fresenius rallied 2.2 percent after beating Q2 view and confirming FY24 outlook.

TeamViewer surged more than 10 percent. The provider of remote connectivity solutions reiterated annual revenue guidance after Q2 revenue beat expectations.

Medical technology company Siemens Healthineers plunged 6.4 percent after missing Q3 sales and earnings forecasts.

U.S. Economic Reports

Private sector employment in the U.S. increased by less than expected in the month of July, according to a report released by payroll processor ADP on Wednesday.

ADP said private sector employment climbed by 122,000 jobs in July after jumping by an upwardly revised 155,000 jobs in June.

Economists had expected private sector employment to increase by 150,000 jobs, matching the job growth originally reported for the previous month.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of July. The Chicago business barometer is expected to dip to 44.5 in July from 47.4 in June, with a reading below 50 indicating contraction.

The National Association of Realtors is due to release its report on pending home sales in the month of June at 10 am ET. Pending home sales are expected to jump by 1.3 percent in June after slumping by 2.1 percent in May.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended July 26th.

Crude oil inventories are expected to decrease by 1.6 million barrels after falling by 3.7 million barrels in the previous week.

The Federal Reserve is scheduled to announce its monetary policy decision at 2 pm ET, followed by Fed Chair Jerome Powell’s post-meeting press conference at 2:30 pm ET.