Here are the top five things you need to know in financial markets on Tuesday, July 26:
1. 7 Dow components to release earnings
Investors looked ahead to a battery of earnings reports on Tuesday with no less than seven Dow components scheduled throughout the day.
3M Company (NYSE:MMM), Caterpillar Inc (NYSE:CAT), DuPont (NYSE:NYSE:DD), McDonald’s Corporation (NYSE:MCD), United Technologies Corporation (NYSE:UTX) and Verizon Communications Inc (NYSE:VZ) will report before the opening bell, with Apple Inc (NASDAQ:AAPL) on top to release after the market close.
As of Monday, 69% of companies having already reported beat estimates, with earnings for the second quarter period from S&P 500 firms estimated to have fallen just 3%, compared to the forecast for a 4.7% decline before the reporting season began.
2. Fed two-day meeting kicks off
The Federal Reserve’s (Fed) two-day policy meeting kicks off on Tuesday with markets preparing for the decision to be announced the following day.
The Fed is not expected to take action on interest rates at the conclusion of its two-day policy meeting at 18:00GMT, or 2:00PM ET, on Wednesday, as policymakers wait for the dust to settle from Britain's decision to leave the EU, but market players will scrutinize its policy statement for fresh hints on the timing of interest rate hikes over the next several months..
A recent string of better than expected data reignited speculation that the U.S. central bank will raise interest rates before the end of the year. Interest rate futures are currently pricing in a 19% chance of a rate hike by September. December odds were at 52%, compared with less than 20% a week ago and up from 9% at the start of this month.
3. Yen surges 1% as Japan stimulus plans fall short
The yen surged to a more than one-week high against the dollar on Tuesday, amid speculation that Japan’s soon-to-be announced stimulus package will disappoint markets.
Investors were seemingly unimpressed by a Nikkei report the government planned a direct fiscal stimulus of around 6 trillion yen ($56 billion) over the next few years. But that may have disappointed a market looking for as much as 10 trillion to 20 trillion yen in fiscal stimulus.
Market players are also looking ahead to the Bank of Japan’s policy meeting later this week. The BOJ is widely expected to ease policy further at the conclusion of its meeting on Friday, which could include a rate cut deeper into negative territory and additional asset purchases.
4. Pound hit by heightened stimulus expectations
The pound managed to pare losses on Tuesday, after hitting a session low of 1.3061 earlier in the session, amid mounting expectations for a rate cut from the Bank of England at the conclusion of its next policy meeting in early August.
The Financial Times reported that Martin Weale, a member of the BOE's rate-setting committee, had dropped his opposition to an easing and now favored immediate stimulus.
5. West Texas loses $43 for the first time since April
Oil prices extended losses from the prior session in European trade on Tuesday, with the U.S. benchmark sliding below the $43-level for the first time since April as a global glut of crude and refined products weighed on markets.
U.S. crude oil futures fell 0.74% to $42.81 at 9:54AM GMT, or 5:54AM ET, while Brent oil lost 0.33% to $44.98.