Wall Street Rebounds Ahead of FOMC & Big Tech Earnings
Today’s Market Update:
Tuesday, the wild summer volatility continued on Wall Street. However, unlike recent sessions, the bulls showed some fight and rallied stocks off the bloody red morning lows. A few positives helped to buoy equities today, including:
· Geopolitical Cooling: Oil prices finally retreated sharply after a pause in military strikes between the U.S. and Iran and a resumption of peace talks. Lower prices have helped relieve immediate inflation fears.
· Bullish Macro Data: Flash PMI data continues to show solid expansion in the U.S. manufacturing and services areas.
Currently, Wall Street is a tale of two markets: tech and everything else. Until the past month or so, tech stocks led the market higher. However, a combination of improving Chinese competition and credit and CAPEX spending concerns has brought many AI leaders back to earth. The divergence between tech and the general market is staggering, with the S&P 500 Index less than 3% off all-time highs. At the same time, the tech-heavy Nasdaq 100 Index ETF (QQQ) briefly went into correction territory Tuesday morning before paring losses. (defined as -10% off all-time highs).
Wednesday Will Be a Market-Moving Day
Big Tech Earnings Loom
As if the market has not been volatile enough, Wednesday will be full of catalysts. Big tech giants Microsoft (MSFT) and Meta Platforms (META) will report earnings on Wednesday after the equity market closes. After the outsized post-EPS moves in reaction to increased CAPEX spending in Tesla (TSLA) and Alphabet (GOOGL), all eyes will be on CAPEX guidance. You can read my Q2 META EPS Preview here.
Key Fed Decision Day
Meanwhile,Kevin Warsh will have a chance to prove his mettle as Fed Chair in a difficult environment. According to reports, Citadel expects the Fed to raise interest rates this week – which would be a huge surprise. That said, betting markets like Polymarket have high conviction that there will be no change in rate policy (80% odds). Typically, I defer to betting markets as they represent real dollars at risk.
Bottom Line
Tuesday offered some relief for beaten-down bulls. However, Wednesday will likely be another volatile session with big tech earnings and a Fed interest rate decision on deck.
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Microsoft Corporation (MSFT): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Alphabet Inc. (GOOGL): Free Stock Analysis Report
Meta Platforms, Inc. (META): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).