Wall Street rises ahead of tech earnings, Fed decision

Wall Street’s main indexes have climbed as investors braced for earnings from megacap growth and technology companies while focusing on an interest rate decision from the Federal Reserve.

All eyes will be on the quarterly reports of Microsoft, Google-owner Alphabet and Meta Platforms this week as market participants will be keen to know whether their earnings justify sky-high valuations.

The action-packed week also includes the Fed’s policy meeting, with the US central bank expected to raise interest rates by 25 basis points on Wednesday.

A majority of economists polled by Reuters expect this to be the last increase of the current tightening cycle, after data this month showed signs of disinflation.

“There’s a real concern that either the Fed will be too hawkish or earnings and forecast will be weaker than expected,” said Thomas Hayes, chairman at Great Hill Capital LLC.

“I do think guidance (for growth stocks) will be better than expected because demand related to generative artificial intelligence is literally unlimited.”

As of Friday, second-quarter earnings are expected to decline by 7.9 per cent, according to Refinitiv data.

The tech-heavy Nasdaq has rallied 34 per cent so far this year, outperforming its Wall Street peers, as rate-sensitive megacap growth companies jumped on hopes of an end to the Fed’s tightening cycle and optimism over AI.

In early trading, the Dow Jones Industrial Average was up 96.12 points, or 0.27 per cent, at 35,323.81, the S&P 500 was up 15.35 points, or 0.34 per cent, at 4,551.69, and the Nasdaq Composite was up 34.32 points, or 0.24 per cent, at 14,067.13.

All of the 11 major S&P 500 sectors advanced in early trading, led by a 0.9 per cent gain in energy stocks.

Helping the Dow notch its longest winning streak in more than six years, Chevron gained 1.5 per cent as the oil giant posted upbeat preliminary quarterly earnings over the weekend.

Tesla eased 0.7 per cent after UBS downgraded its rating on the stock.

Toymaker Mattel rose 1.4 per cent as the Barbie movie set a record as the biggest domestic debut of 2023 while shares of distributor Warner Bros added 1.6 per cent.

AMC Entertainment jumped 17.6 per cent after a judge blocked the theatre chain’s stock conversion plan that risked diluting investors’ holdings in the company.

AMC’s preferred shares fell 7.5 per cent.

Exchange operator Nasdaq trimmed the weight of a handful of companies that make up close to half of the Nasdaq 100 to address “overconcentration” in the benchmark.

Meanwhile, US business activity slowed to a five-month low in July, dragged down by decelerating service-sector growth, a survey showed.

Advancing issues outnumbered decliners by a 2.91-to-1 ratio on the NYSE and by a 1.61-to-1 ratio on the Nasdaq.

The S&P index recorded 12 new 52-week highs and one new low while the Nasdaq recorded 25 new highs and 33 new lows.

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