S&P 500; US Indexes Fundamental Daily Forecast – Higher Opening Expected on Facebook Beat

U.S. stock indexes are trading firm during the pre-market session. All three major indexes hit new contract highs during the early session with the September E-mini NASDAQ-100 Index posting the best performance. Currently, it is sitting just under the psychological 6000 level, boosted by a strong performance by Facebook.

Facebook stock is expected to gap higher based on the after-market trade. The social-media giant reported a much-higher quarterly profit, driven by surging sales of mobile video ads, as its advertising revenue grew at more than twice the rate of larger rival Google.

The stock surged as much as 4 percent to a record high after the company said on a conference call to discuss the results that 2017 expenses would rise less than previously forecast. It is now saying that expenses will go up 40 to 45 percent, instead of 40 to 50 percent.

Earnings season has been strong so far and this trend is expected to continue. According to data from The Earnings Scout, with 34 percent of S&P 500 components having reported as of Wednesday morning, 78 percent have beaten expectations on the bottom line and 73 percent have topped sales.

In other news, the major U.S. stock indexes closed higher across the board on Wednesday after the U.S. Federal Reserve’s interest rate decision and monetary policy statement.

In the cash market, the benchmark S&P 500 index settled at 2477.83. The blue chip Dow Jones Industrial Average closed at 21711.01, up 97.58 or +0.45% and the tech-based NASDAQ Composite finished the session at 6421.12, up 8.95 or +0.14%.

The Dow was supported by Boeing, Its earnings topped expectations. Coca-Cola and Ford also posted better-than-expected quarterly results. The S&P 500 Index was underpinned by a surge in oil prices which helped boost energy stocks. The NASDAQ was up, but gains were limited as investors awaited the release of Facebook earnings after the close.

U.S. Federal Reserve

The Fed left its benchmark interest rate unchanged as previously expected. However, the central bank laid the groundwork for winding down its massive stimulus program in September. The move is essentially yield-curve management. The Fed is saying that the economy is too weak to handle a full rate hike, but the central bank can continue to tighten gradually by trimming its $4.5 trillion balance sheet.

The Federal Reserve said they plan to start unwinding “relatively soon,” which investors interpreted to mean September, since previously the central bank hinted it would start in December.

Finally, the central bank also acknowledged that inflation remains below its 2 percent target.

Forecast

We’re still in an earnings driven market. The stock market should continue to grind higher as long as earnings continue to beat expectations. There are geopolitical and political risks out there, but the volatility index (VIX) seems to be indicating that investors aren’t worried.