NASDAQ 100, Dow Jones, S&P 500: Slightly Lower Trade as Investors Brace for Fed’s Rate Decision

Highlights

• US stocks open slightly lower, awaiting Fed’s rate decision.
• Google-parent Alphabet soars on robust cloud revenue growth.
• Boeing gains while Snap tumbles on weak guidance.

Overview

The major US. stock market averages opened on a slightly lower note on Wednesday as investors eagerly awaited the Federal Reserve’s latest interest rate decision. The Dow Jones Industrial Average fell 8 points, or 0.03%, the S&P 500 slid by 0.18%, and the Nasdaq Composite declined 0.32%. The market sentiment was influenced by a batch of corporate earnings, particularly from major technology companies.

Among the tech giants, Google-parent Alphabet surprised investors, soaring over 5% thanks to robust cloud revenue growth, which fueled a better-than-expected quarter. On the flip side, Microsoft faced a dip of more than 3% due to slowing cloud revenue growth. Beyond Big Tech, Snap shares took a tumble of 19% after providing a weak guidance for the current quarter.

However, amidst the corporate earnings frenzy, Dow component Boeing shone brightly with a gain of more than 4%, boosted by a second-quarter beat and increased commercial aircraft deliveries.

Fed to Raise Rates by 25 Basis Point, but Will They Pause?

Investor optimism about easing inflation has been steadily growing, leading many to believe that the Federal Reserve might halt rate hikes after the July meeting. The CME Group’s FedWatch Tool indicates a 100% likelihood of a quarter percentage point rate increase during the Wednesday meeting. Nevertheless, investors are anxiously awaiting the Federal Reserve’s guidance on whether this rate hike might be the last in this cycle.

The rate-setting Federal Open Market Committee is scheduled to release its decision at 18:00 GMT, followed by Chairman Jerome Powell’s news conference half an hour later. While traders are pricing in a 100% chance of an increase, the probability of another hike before year-end stands at just 38%, according to CME Group data. The central bank may hint at future rate movements, but it’s unlikely to make any firm commitments.

Market participants, however, advise against being overly optimistic that the Fed’s decision today will mark the end of the rate-hiking cycle. Caution prevails among some investors who believe that further rate hikes might still be in the cards.

Wall Street celebrated a winning day on Tuesday, with the Dow securing its 12th-straight winning session, a feat not seen for the blue-chip average since February 2017. The S&P 500 and Nasdaq Composite also closed higher by approximately 0.3% and 0.6%, respectively.

Looking ahead, investors will closely monitor the latest corporate financial releases, including those of Meta, Chipotle, and Mattel, scheduled to drop after the market closes on Wednesday.

In conclusion, the market’s opening dip on Wednesday was driven by anticipation and caution ahead of the Federal Reserve’s interest rate decision. While positive corporate earnings from Google-parent Alphabet and Boeing offered some relief, investors remain watchful for the Fed’s future rate hike indications. As the market moves through this crucial phase, keeping an eye on corporate releases will be vital for gauging its short-term trajectory.