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Fed decision, megacap earnings ahead this week - what's moving markets

Published 04/29/2024, 03:30 AM
© Reuters
- -- Stock futures in New York tick higher to begin a new trading week, with markets preparing for a major Federal Reserve monetary policy announcement. More megacap corporate results are also due out in the coming days, including earnings from Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL). Elsewhere, Tesla (NASDAQ:TSLA) strikes a deal with Baidu (NASDAQ:BIDU) to implement its advanced full self-driving features in China through the internet giant’s mapping and navigation functions, according to a Bloomberg News report.

1. U.S. futures point higher

U.S. stock futures edged higher on Monday as traders geared up for a key Federal Reserve interest rate decision and a fresh batch of corporate results this week.

By 03:25 ET (07:25 GMT), the Dow futures contract had inched higher by 59 points or 0.2%, S&P 500 futures had gained 10 points or 0.2%, and Nasdaq 100 futures had increased by 47 points or 0.3%.

The main indices closed in the green at the end of the prior session, lifted by upbeat quarterly results from Google-owner Alphabet (NASDAQ:GOOGL) and software group Microsoft (NASDAQ:MSFT) that spurred a rise in megacap tech stocks. The benchmark S&P 500 and the tech-heavy Nasdaq Composite both posted their largest weekly percentage gains since November 2023 and snapped multi-week losing streaks.

New data showing that U.S. inflation accelerated slightly in March on a year-on-year basis also bolstered hopes that the Fed could roll out a rate reduction as soon as September and soothed some worries over stagflation in the world's biggest economy.

2. Fed rate decision ahead

The major economic event of the week is due to take place on Wednesday, when the Fed is scheduled to release its latest rate announcement.

Markets do not expect the U.S. central bank to alter borrowing costs from a more than two-decade high range of 5.25% to 5.50%, meaning that particular attention will be placed on comments from Fed Chair Jerome Powell. In April, Powell flagged that recent data points have "not given us greater confidence" that inflation is sustainably being cooled down to the Fed's 2% target level, adding that "it's likely to take longer than expected to achieve that confidence."

Officials remain wary of slashing rates too soon because of signs of persistently elevated prices, resilience in the labor market and overall strong activity in the U.S. economy. Many traders are subsequently betting that the Fed's much-anticipated first cut, which some thought would come this spring, will now not come until September, according to CME Group's (NASDAQ:CME) closely-watched FedWatch Tool.

But, as analysts at ING warned in a note to clients last week, "the risk remains that the Fed ends up bringing interest rates to a more neutral level more slowly and over a longer period" than forecasts predict.

3. Amazon, Apple highlight weekly earnings parade

E-commerce titan Amazon and iPhone-maker Apple are set to headline this week's raft of corporate results.

For Amazon, which reports after the closing bell on Tuesday, investors will be keen to see if the company's ongoing effort to scale back costs are continuing to boost profits. The push to slash expenses, as well as strong consumer demand during the holiday shopping season, helped margins at its huge North American operations improve in the prior quarter.

Apple will unveil their earnings after the close on Thursday, with traders likely to train their gazes on faltering shipments of the California-based firm's flagship iPhone handset device and the ability of its Services division to help offset this weakness.

Analysts also expect artificial intelligence to be in the limelight for both these companies, particularly after megacap peers like Alphabet, Microsoft and Facebook-parent Meta Platforms (NASDAQ:META) recently offered more details on their plans to spend big on integrating the nascent technology.

4. Tesla to partner with Baidu for self-driving rollout in China - Bloomberg

Tesla struck a deal with Baidu to implement its advanced full self-driving (FSD) features in China through the internet giant’s mapping and navigation functions, Bloomberg reported on Monday.

The world’s biggest electric vehicle maker plans to deploy its FSD services -- which Chief Executive Elon Musk has touted as a major focus point -- using lane-level navigation and mapping provided by Baidu, the report said.

The report comes just a week after Baidu said that Tesla vehicles will integrate Baidu maps next month. Musk visited China over the weekend.

Partnering with Baidu allows Tesla to clear a major regulatory hurdle in gaining access to data collection on China's public roads, now allowing it to potentially offer FSD technology in the country.

5. Oil prices dip

Oil prices fell sharply Monday as peace talks between Israel and Hamas eased concerns of a wider conflict in the Middle East, as well as the potential for a disruption to supplies from the vital region.

By 03:26 ET, the U.S. crude futures traded 1.0% lower at $83.05 a barrel, while the Brent contract dropped 0.9% to $87.39 per barrel.

A Hamas delegation will visit Cairo on Monday for talks aimed at securing a ceasefire, a Hamas official told Reuters on Sunday, with the group expected to respond to Israel’s latest Gaza phased truce proposal delivered on Saturday.

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