Anticipation of Big Tech Earnings
Wall Street experienced a surge on Monday as investors awaited the release of earnings from mammoth growth and technology companies, with a particular emphasis on the Federal Reserve's impending interest rate decision. Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOGL) - the company behind Google, and Meta Platforms have attracted significant attention, with the market eager to see if their earnings will justify their lofty valuations.
Fed's Upcoming Policy Decision
The week promises excitement not just due to tech earnings but also because of the Fed's policy meeting. It's predicted that the central bank will bump up interest rates by 25 basis points come Wednesday. A survey by Reuters indicates that the majority of economists expect this to be the concluding rise of the ongoing tightening cycle, particularly after recent data suggested a slowdown in inflation.
According to Thomas Hayes, chairman at Great Hill Capital LLC, there is apprehension about the Fed adopting an overly aggressive stance or the earnings and forecast proving to be weaker than anticipated. However, he adds, "Guidance for growth stocks is anticipated to surpass expectations due to the boundless demand related to generative artificial intelligence."
Tech Earnings and Wall Street's Performance
As of Friday, the second quarter's earnings are projected to dip by 7.9% based on data from Refinitiv. Nevertheless, the Nasdaq, which heavily leans on tech, has had a good year, climbing 34%, outshining its Wall Street counterparts. This is primarily due to the rise of rate-sensitive mega cap growth firms on the back of optimism about the Fed's tightening cycle's potential end and artificial intelligence enthusiasm.
Stock Market's Early Gains
In early trading, all 11 key S&P 500 sectors reported gains, with energy stocks spearheading a 0.9% increase. The Dow Jones Industrial Average and the S&P 500 also reported gains of 0.27% and 0.34% respectively, while the Nasdaq Composite grew by 0.24%.
Individual Stock Performances
In individual stock news, Chevron (NYSE: CVX) saw a 1.5% rise following robust preliminary quarterly earnings reported over the weekend, helping Dow to achieve its longest winning streak in over six years. Conversely, Tesla's (NASDAQ: TSLA) shares slid by 0.7% after UBS downgraded its rating. Toy manufacturer Mattel (NASDAQ: MAT) saw a 1.4% rise thanks to the record-breaking domestic debut of the "Barbie" movie, and Warner Bros, the film's distributor, also experienced a 1.6% rise in shares.
Legal and Market Shifts
In other market news, AMC Entertainment (NYSE: AMC) saw a 17.6% increase after a judge thwarted the theater chain's stock conversion plan, which risked diluting investor shares. To address "overconcentration" in the benchmark, exchange operator Nasdaq adjusted the weight of several companies forming nearly half of the Nasdaq 100.
Business Activity Trends
Despite the overall market optimism, July business activity dipped to a five-month low, pulled down by slower service-sector growth as shown by a recent survey. 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, suggesting a continuing upward trend despite the slowdown.