4:15pm: Snap miss fuels fears of shrinking digital ad spending
The Dow closed Monday up 91 points, 0.3%, at 31,990, the Nasdaq Composite slid 51 points, 0.4%, to 11,783 and the S&P 500 added 5 points, 0.1%, to 3,967.
Tech stocks struggled after Snap Inc (NYSE:SNAP) posted an earnings miss last week, setting off worries of declining digital ad spending, according to media reports. Facebook parent Meta Platforms Inc (NASDAQ:FB), Amazon.com Inc (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) all saw shares decline by more than 1%.
Meanwhile, all eyes are on the upcoming GDP report and the Federal Reserve meeting later this week.
“Investors likely believe Thursday’s GDP report will show a second quarter of decline, which is the unofficial signal of recession,” Sam Stovall, chief investment strategist at CFRA Research, told CNBC on Monday. “While the Fed will probably announce a 75-basis-point rate hike on Wednesday, they will offer a more moderate tone towards further rate increases. We see this counter-trend rally continuing in the near term.”
12:05 pm: US stocks mixed midday, as Fed preps decision on interest rates
US Treasury yields are up Monday, as the Street prepares for an interest rate policy decision from the US Federal Reserve, and a number of major companies prepare to post earnings.
After being the only major index to stay in green territory this morning, the Dow Jones was up 0.3% to 31,995 points, the S&P 500 was up 0.2% to 3,968 and the Nasdaq Composite was down 0.4% at 11,792 at midday.
The 10-year treasure note was up 4 basis points or 2.823%, and the 30-year bond was up 6 basis points or 3.058%. The Fed’s two-day policy meeting is expected to see a 75 basis point hike to interest rates.
In commodities, oil prices are up against the weaker US dollar. US West Texas Intermediate crude futures rose 85 cents, or 0.9%, to US $95.55 a barrel. Brent crude futures for September settlement rose 68 cents, or 0.66%, to $103.88 a barrel.
The Street is expecting tech giants Alphabet, Amazon, Apple and Microsoft to post earnings reports this week.
At midday, the major movers included the S&P seeing SVG Financial Group up 7.7%, but Newmont Corporation falling by 10.5%. Nasdaq saw Pinduoduo Inc (NASDAQ:PDD) up by 3.4% but Lucid Group Inc (NASDAQ:LCID) down by 4.2%. Over at the Dow, Chevron Corporation (NYSE:CVX) was up 2.5% but Salesforce Inc was down 2.7%.
Recent risk-on moves appear to be on thin ice as markets gear up for another bout of earnings and a crucial US Fed rate decision, according to Joshua Mahony, senior market analyst at online trading platform IG.
“With the Fed expected to raise rates by 75 to 100 basis points on Wednesday, we are set for a timely reminder that banking margins will continue to improve as we move throughout this year. However, while banking stocks typically benefit from higher rates as they often come against a strong economic backdrop, financial stocks are at risk given the looming recession that is widely anticipated,” said Mahony in a note to clients.
10.50am: Proactive North America headlines:
Bitcoin and Ethereum lose weekend gains as crypto markets manage to hold the line
Revive Therapeutics provides update on proposed amended study protocol for its Phase 3 bucillamine for COVID-19 clinical trial
San Leon Energy: Production resumes at Oza field in Nigeria
Southern Silver Exploration reports expanded mineralization in new drill results at CLM project in Mexico
Nextleaf Solutions says its tech to produce THC-free CBD from industrial hemp has been validated
Predictmedix reveals “exceptional” accuracy rates for monitoring of symptoms and physiological parameters
X1 Esports and Entertainment to acquire ShiftRLE to gain entry into Rocket League esports
Gevo closes on purchase of South Dakota land; plans fall ground-breaking for first renewable energy plant
Jushi Holdings to open its 34th retail location nationwide in Alexandria, Virginia
ImagineAR signs augmented reality activation and engagement partnership with Baltimore Ravens
Nickel North Exploration provides additonal information on debt settlements ahead of AGM
Majuba Hill Copper closes non-brokered private placement financing for total gross proceeds of $2.1 million
Voyager bailout proposal from Alameda Research shot down by lawyers
Predictmedix reveals “exceptional” accuracy rates for monitoring of symptoms and physiological parameters
X1 Esports and Entertainment to acquire ShiftRLE to gain entry into Rocket League esports
Gevo closes on purchase of South Dakota land; plans fall ground-breaking for first renewable energy plant
Jushi Holdings to open its 34th retail location nationwide in Alexandria, Virginia
ImagineAR signs augmented reality activation and engagement partnership with Baltimore Ravens
Nickel North Exploration provides additonal information on debt settlements ahead of AGM
Majuba Hill Copper closes non-brokered private placement financing for total gross proceeds of $2.1 million
Voyager bailout proposal from Alameda Research shot down by lawyers
9.35am: Stocks rise modestly ahead of busy week
US stocks opened slightly higher on Monday as investors awaited the Fed’s interest rate hike decision due Wednesday while earnings season continues.
Just after the open, the Dow Jones Industrial Average had added 23 points at 31,922 points, while the S&P 500 was up 6 points at 3,967 points and the tech-heavy Nasdaq Composite was up 9 points at 11,843 points.
OANDA senior market analyst Craig Erlam noted that it had been a quiet start to what otherwise would have been a lively week in financial markets, with the focus on the Fed’s Wednesday meeting and big tech earnings.
“Stock markets are modestly in the green, with a fair amount of straw clutching at play once more,” Erlam said. “Earnings not being as bad as feared, the Fed only hiking by 75 basis points and China putting together a plan in the hope of averting the next wave of the property crisis is among the reasons being given for stock markets rising. It all seems a bit desperate.”
6.30am: Calm before mid-week news
US stocks were expected to open higher on Monday ahead of the Federal Reserve’s latest interest rate verdict on Wednesday with investors also keeping a watchful eye on more corporate earnings through the week.
Futures for the Dow Jones Industrial Average were trading 0.4% higher pre-market, while those for the broader S&P 500 index were 0.3% higher, and futures for the tech-laden Nasdaq-100 were up 0.5%.
For investors and traders alike, the big question is whether this week will bring the last of the 75 basis point interest rate hikes for the world’s biggest economy.
“There are some indications in terms of economic data and also oil prices that we have seen a peak in inflation in the US, and if this holds true, then it is highly likely that the Fed will slow down its dice roll,” said Naeem Aslam, chief market analyst at avatrade.com.
“If, in the upcoming meeting, we do get a hint that the Fed is going to slow down the process of the interest rate hike, we are likely to see a strong rally in the equity markets, especially for the tech stocks as they are massively cheap,” he added.
Against this backdrop, investors are standing ready to scrutinize the Fed’s rate verdict and accompanying statement after the two-day FOMC meeting.
With inflation running at a level not seen in over 40 years, the Fed has a tough task at hand. It has been raising interest rates steadily and aggressively through the year to rein in price pressures but those hikes are also likely to dampen economic growth, raising fears that the US will slide into recession.
That aside, the US quarterly earnings season continues to unfold and will have a bearing on market direction.
“This week features a raft of heavyweight US second-quarter earnings from tech heavyweights, which could drive volatility on stock markets in addition to the FOMC (Federal Open Market Committee),” said Jeffrey Halley, senior market analyst at OANDA.
Tech heavyweights Alphabet and Microsoft both announce earnings on Tuesday while Meta comes into focus on Wednesday and Apple’s results are due on Thursday.
In energy markets, WTI crude oil futures were 1.0% higher at $95.64 a barrel, while Brent crude futures were up 1.1 % at $104.30.
Contact the author at jon.hopkins@proactiveinvestors.com