Stocks climb ahead of Federal Reserve meeting as corporate earnings season continues: Market recap

It was a tumultuous day in the world of finance as a selloff in the largest companies sent stocks plummeting. Investors were on edge as they awaited earnings reports from tech giants and central bank decisions that would have a significant impact on market direction.

The S&P 500 saw over 300 shares rise, but tech weakness dragged down the index, with Nvidia Corp. taking a major hit, tumbling 6%. Investors were particularly wary of Microsoft Corp.’s upcoming results, fearing that firms may not be seeing the expected returns from artificial intelligence. The outcome of Microsoft’s earnings would set the tone for other heavyweights reporting later in the week. All eyes were also on the Federal Reserve’s decision scheduled for Wednesday.

Tom Essaye, from The Sevens Report, warned, “If the Fed does not signal a September rate cut, markets could get a bit ugly given recent tech weakness — especially if earnings underwhelm.”

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While the Fed was anticipated to maintain benchmark rates at their current levels, traders were eagerly anticipating any signals indicating a potential shift towards policy easing. Leading up to the decision, data showed an increase in US consumer confidence, driven by a more positive outlook for the economy and better-than-expected job openings.

The day saw the S&P 500 drop to 5,425, with the Nasdaq 100 sliding 1.4%. A gauge of the “Magnificent Seven” megacaps also took a hit, experiencing a 2% decline. The Russell 2000 of small firms remained relatively stable. Meanwhile, Microsoft Azure was grappling with global connection issues, while CrowdStrike Holdings Inc. and Procter & Gamble Co. experienced significant declines due to various issues.

Treasury 10-year yields remained steady at 4.17%, while the yen fluctuated. Bank of Japan Governor Kazuo Ueda was set to announce plans for quantitative tightening and deliver a decision on the policy interest rate on Wednesday.

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The market rally seen earlier in the year was contingent on the Fed’s decisions regarding interest rates and statements following the conclusion of their two-day meeting. With signs of cooling inflation based on the latest consumer price index, traders were seen reallocating investments out of Big Technology shares into small-capitalization stocks and value plays.

Goldman Sachs Group Inc.’s CEO, David Solomon, adjusted his forecast, indicating that one or two Fed rate cuts later in the year were increasingly likely. This change in perspective came after previously predicting no rate reductions in 2024.

In other corporate news, Pfizer Inc., Merck & Co., JetBlue Airways Corp., Archer-Daniels-Midland Co., SoFi Technologies Inc., and BP Plc all made significant moves and announcements affecting their stocks.

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Looking ahead, key events for the week included Eurozone CPI data, Bank of Japan policy decision, US ADP employment change, Meta Platforms earnings, and more.

As the day came to a close, major indices and currencies experienced fluctuations, while cryptocurrencies and bonds also saw some movement. This story was produced with the help of Bloomberg Automation.

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