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Top 5 Things to Know in the Market on Wednesday

EconomyJul 31, 2019 08:24AM ET
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© Reuters. - Here are the top five things you need to know in financial markets on Wednesday, July 31:

1. Fed expected to cut rates

The Federal Reserve is expected to cut rates for the first time in more than a decade when it announces its policy decision at 2:00 PM ET (18:00 GMT).

Although a quarter-point cut is priced in, there is some expectation that the statement will reveal dissenting votes, sharpening the focus on Fed Chairman Jerome Powell’s indications for the future path of monetary policy at the follow-up press conference.

Markets will look for guidance on the future path of interest rates. Fed funds futures put the chance for another 25 basis point cut to arrive in September at just under 70% with the odds for a third in December hovering just above 50%.

The Fed's meeting comes against a backdrop of loosening monetary policy around the world. The Bank of Brazil is also expected to cut interest rates at its meeting later Wednesday.

Ahead of the Fed decision, markets will receive input on the health of the U.S. labor market with the monthly ADP private payrolls report at 8:30 AM ET (14:30 GMT). That comes ahead of the official government data set for release on Friday.

A regional reading on manufacturing activity in the Chicago area will also be released at 9:45 AM ET (13:45 GMT).

2. Apple, AMD provide mixed messages on earnings front

Apple (NASDAQ:AAPL) shares jumped more than 4% after quarterly earnings beat consensus even as iPhone sales dropped to less than half of its revenue for the first time in seven years. Revenue from services, Macs and iPads all rose, and CEO Tim Cook's sales forecast for its fiscal fourth quarter topped expectations.

By contrast, shares in Advanced Micro Devices (NASDAQ:AMD) sank more than 5% as the chipmaker provided lower-than-expected revenue guidance for the third quarter.

General Electric (NYSE:GE) will be the most-watched earnings release before the open, with markets focused on progress in its turnaround plan. Spotify (NYSE:SPOT) will also report ahead of the bell, with Qualcomm (NASDAQ:QCOM) set to release after the market close.

3. U.S.-China trade talks end without clear progress

High-level negotiations in Shanghai ended ahead of schedule without any clear progress.

No official explanation was given for U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin’s early departure. The news came after U.S. President Donald Trump released a series of tweets Tuesday lashing out at China for what he called its unwillingness to buy American agricultural products, and repeating accusations of unfair trade practices.

Playing down speculation of a complete failure in the talks, China’s Global Times editor-in-chief Hu Xijin - who is often considered a spokesperson for Beijing policy - said that negotiators had an “efficient and constructive deep exchange”.

He tweeted that both sides discussed China increasing purchases of American farm products and the U.S. agreed to facilitate conditions towards that end, while both parties planned to “hold future talks”.

4. U.S. futures rise on earnings ahead of Fed decision

Positive earnings and guidance from Apple (NASDAQ:AAPL) seemed enough to break a two-day losing streak for Wall Street as traders braced for the Fed announcement. While the U.S.-China trade talks ended with little sign of progress, there was relief that there was also no obvious escalation of tensions.

Dow futures gained 72 points, or 0.3%, by 5:42 AM ET (9:42 GMT), S&P 500 futures rose 6 points, or 0.2%, while Nasdaq 100 futures traded up 31 points, or 0.4%.

European stocks were also higher, helped by surprisingly strong earnings from BNP Paribas (OTC:BNPQY), Credit Suisse (NYSE:CS), Next (OTC:NXGPY) and Puma SE (OTC:PMMAF). Trump's Twitter rant against China had sent European stocks to their largest daily loss in three months on Tuesday, while Asian shares closed sharply lower overnight.

5. Euro zone economic growth halved in Q2

The euro zone produced another sign of the global slowdown as economic growth slowed in the second quarter, dropping to just 0.2% from 0.4% in the previous three months.

Inflation data for the region also cooled, paving the way for the European Central Bank to proceed with an expected easing of its monetary policy in September.

-- Reuters contributed to this report.

Top 5 Things to Know in the Market on Wednesday

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