US Stocks Struggle Amid Tech Earnings & Fed Meeting
US stocks showed mixed performance on Tuesday, as investors hesitated to take strong positions ahead of the Federal Reserve's policy meeting and tech giants' earnings reports. The S&P 500 fluctuated throughout the day, with all eyes on Microsoft Corp. and Alphabet Inc., set to report their results after the closing bell. Market sentiment is cautious, as investors wait to see if these earnings will justify the companies' hefty year-to-date share gains.
"We are about to enter the height of earnings season and of the companies that have reported results so far, the majority have reported better-than-expected earnings," said Brad Bernstein, managing director at UBS Wealth Management. "As long as earnings continue to exceed expectations, the market can continue to move higher."
Overall, S&P 500 companies with a combined market value of $16.3 trillion are publishing earnings this week, making it a crucial period for investors and traders.
European Shares Get a Lift from Resources Firms
European shares edged higher, boosted by the strong performance of resources companies, including Anglo American Plc and Rio Tinto Plc. These firms benefited from China's latest stimulus pledge, which aimed to support economic growth. Among individual movers, consumer-goods giant Unilever Plc stood out, gaining as much as 5.6% after beating sales estimates. Likewise, spirits group Remy Cointreau SA surged after Chinese sales helped it surpass forecasts.
Investors Cautious Ahead of Fed and ECB Meetings
Investors are exercising caution and refraining from making significant moves as they await signals from the Federal Reserve and European Central Bank policymakers. The outcome of the Fed's potential policy path is of particular importance to global markets. Uncertainty surrounds whether the Fed will stop the tightening campaign or raise rates beyond July. "Investors are unlikely to feel safe enough to get into the equities water before such an eventful week," wrote Mizuho International Plc strategists Evelyne Gomez-Liechti and Helen Rodriguez in a note.
European market sentiment was further dampened by a euro-area bank lending survey showing a record plunge in loan demand from the bloc's companies. Alongside a dismal business outlook reading from Germany, the data raised questions over the ECB's capacity to hike interest rates much beyond the 25 basis points priced for this Thursday's meeting.
Chinese Leaders Signal More Aid to the Economy
Chinese leaders used this week's Politburo meeting to indicate further measures to bolster the country's economy. This news provided support to oil prices, which held near three-month highs. Copper and iron ore also rose, given their importance for China's construction sector. Furthermore, US-listed Chinese stocks extended their rally, reflecting the market's positive response to the Chinese government's support measures.
Dollar Continues to Gain for Sixth Consecutive Session
The dollar index extended its gains for the sixth consecutive session, reaching 101.5 on Tuesday, the highest level in two weeks. Traders remain focused on the upcoming FOMC monetary policy decision, where a 25 basis points rate increase is already priced in. However, doubts persist about the central bank's future tightening actions beyond July. The US economy's resilience continues to strengthen the dollar relative to major peers, including European currencies.
Treasury Yields Near Two-Week High Before FOMC Meeting
The yield on the US 10-year Treasury note rose to 3.9%, the highest in two weeks, as traders brace for the FOMC monetary policy decision on Wednesday. While a 25 basis points increase in the fed funds rate is widely expected, all eyes will be on the Fed's next steps. Many policymakers have signaled that another rate hike will likely be necessary, but traders remain divided on the timing. Bets for a September increase currently stand at about 19% and for November around 30%. Meanwhile, the yield on the US two-year note, the most sensitive to short-term policy moves, was around two-week highs of 4.87%.
Oil Prices Dip After Reaching Three-Month High
Oil prices slightly declined after reaching a three-month high. The bullish outlook was supported by China's plans to bolster its economy and ongoing supply tightening in global crude markets. Brent crude held above $82 a barrel in London, following a 4% gain in the previous three sessions. The real estate sector in China received support, although major fiscal or monetary loosening was not indicated.
The market's renewed strength is also manifesting in oil's key timespreads. The gap between the two nearest contracts for WTI was 34 cents a barrel in backwardation — the highest since November — after briefly dipping into the opposite bearish contango structure last week.
Gasoline in Focus After US Refinery Unit Shutdown
Gasoline prices are in focus after Exxon Mobil Corp. shut down a unit at one of the largest US refineries, leading US futures to their highest level since October. Supply disruptions or other significant events in the oil and gasoline markets can have broad implications for the energy sector and overall market sentiment.
Learn Forex Trading UK
Chump Profit aims to keep traders informed with this afternoon's market update, Learn Forex Trading UK. US stocks remained uncertain due to upcoming tech earnings and the Federal Reserve meeting. European shares saw a lift from resources firms, but caution prevailed ahead of central bank meetings. Chinese leaders signaled further aid to the economy, supporting oil prices. The dollar continued to gain, and US stock futures pointed higher on strong earnings reports. Treasury yields hovered near two-week highs, anticipating the FOMC decision. Oil prices dipped slightly after reaching a three-month high, while gasoline prices were in focus after a US refinery unit shutdown. Traders are reminded to stay vigilant and exercise proper risk management as market conditions can change rapidly. Keep following Chump Profit for timely updates to make informed trading decisions.
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