FX.co ★ Upbeat Earnings News May Spark Early Rally On Wall Street

The major U.S. index futures indicate a sharp rise on Wall Street this Wednesday, suggesting an early rally following Tuesday's mixed performance. Stocks are likely to gain from favorable corporate earnings reports, particularly from Advanced Micro Devices (AMD). In pre-market trading, AMD shares have surged by 7.9%, buoyed by the company’s second-quarter results that surpassed analyst expectations.

Similarly, Starbucks (SBUX) exhibits significant pre-market strength after aligning its fiscal third-quarter earnings with estimates and maintaining its full-year guidance. DuPont (DD) is another standout, with its shares rising following better-than-expected second-quarter results.

Conversely, Microsoft (MSFT) might face downward pressure despite quarterly earnings and revenue exceeding expectations, primarily due to disappointing results from its cloud computing segment.

Wall Street’s upward trend also coincides with anticipation around the Federal Reserve's monetary policy announcement this afternoon. While the Fed is expected to keep interest rates unchanged, its accompanying statement could profoundly impact the September rate outlook. Recent inflation data has fueled optimism for a rate cut, with CME Group’s FedWatch Tool indicating an 87.7% probability of a quarter-point reduction and an 11.9% chance of a half-point cut.

The major U.S. stock indexes exhibited divergent movements on Tuesday after Monday's stagnation. The tech-heavy Nasdaq saw a sharp decline, plunging 222.78 points or 1.3% to close at 17,147.41, its lowest in over a month. The S&P 500 also dropped by 27.10 points or 0.5%, settling at 5,436.44. In contrast, the Dow ended the day up by 203.40 points or 0.5%, reaching 40,743.33.

The Nasdaq’s downturn was driven by tech stocks, notably Nvidia (NVDA), which fell by 7.0%, marking its lowest closing in two months. Both Microsoft (MSFT) and Advanced Micro Devices (AMD) also declined ahead of their earnings announcements.

Concerns about the profitability of tech stocks following a recent rally to record highs may have contributed to the sector's weakness. Semiconductor stocks, in particular, fared poorly, with the Philadelphia Semiconductor Index plummeting by 3.9% to its lowest in over two months. Lattice Semiconductor (LSCC) led the decline, dropping by 9.4% after reporting disappointing second-quarter results.

The NYSE Arca Computer Hardware Index fell by 2.2% due to significant weakness in the computer hardware sector. Conversely, telecom stocks experienced substantial gains, driving the NYSE Arca North American Telecom Index up by 3.5%, led by Lumen Technologies (LUMN), which skyrocketed by 37.6%.

Airline stocks also saw notable gains, with the NYSE Arca Airline Index rising by 2.8%, spurred by JetBlue’s (JBLU) 12.3% increase following an unexpected second-quarter profit.

Despite the Dow's rise, Merck (MRK) faced a steep decline of 9.8% after delivering better-than-expected second-quarter results but offering disappointing full-year guidance. Procter & Gamble (PG) also fell by 4.8% following a revenue miss.

Meanwhile, Dow components Travelers (TRV), Goldman Sachs (GS), and JPMorgan (JPM) posted strong gains.

**Commodity and Currency Markets**

Crude oil futures are up $2.52, trading at $77.25 per barrel after a $1.08 drop to $74.73 per barrel on Tuesday. Gold is trading at $2,466.20 per ounce, up $14.30 from the previous session's close of $2,451.90. On Tuesday, gold surged by $26.40.## Currency Update

On the currency front, the U.S. dollar is trading at 150.14 yen, down from 152.77 yen at the close of New York trading on Tuesday. Against the euro, the dollar stands at $1.0837, up slightly from $1.0815 the previous day.

## Asia Markets

Asian stocks experienced a positive surge on Wednesday, while the yen exhibited volatility following the Bank of Japan's decision to raise short-term policy rates and outline plans to decrease monthly bond buying, signaling a hawkish shift. Weak manufacturing data from China further fueled speculation that Beijing might implement additional stimulus measures to support its economy.

Investors analyzed mixed earnings reports from Microsoft and AMD and awaited a Federal Reserve announcement for more insight into potential interest rate cuts. In Asian trading, bond yields and the dollar remained relatively stable. Meanwhile, gold prices increased and oil prices rebounded from seven-week lows due to rising tensions in the Middle East.

Reports suggested Ismail Haniyeh, head of Hamas's political wing, was killed in Iran.

- **China's Market:** The Shanghai Composite Index rallied 2.1 percent to 2,938.75 after a Politburo meeting hinted at more consumer-focused stimulus.

- **Hong Kong's Market:** The Hang Seng Index surged 2.0 percent to 17,344.60, spurred by a decline in Chinese manufacturing activity, which raised expectations for further stimulus.

- **Japan's Market:** Japanese markets climbed following a surprise interest rate hike to 0.25 percent by the Bank of Japan. The Nikkei 225 Index jumped 1.5 percent to 39,101.82, while the Topix Index increased 1.5 percent to 2,794.26. Tokyo Electron surged 7.4 percent and Advantest gained 4.5 percent following reports that the Biden administration might exempt certain chip equipment makers from upcoming export restrictions. Economic data showed Japanese retail sales rose 3.7 percent in June, though factory output declined in the same month.

- **South Korea's Market:** The Kospi Index rose 1.2 percent to 2,770.69 on hopes that the Fed might initiate rate cuts this year, despite data showing a decline in industrial output for the second consecutive month. SK Hynix gained over 3 percent ahead of tech earnings reports.

- **Australia's Market:** Australian markets saw significant gains as softer inflation reports eased pressure on the Reserve Bank of Australia to raise rates. The S&P ASX 200 Index climbed 1.8 percent to a record high of 8,092.30, with the All Ordinaries Index rising 1.8 percent to 8,320.40.

- **New Zealand's Market:** The S&P NZX-50 Index edged up by 0.1 percent to 12,405.27.

## Europe Markets

European stocks advanced on Wednesday, buoyed by expectations of Chinese stimulus and positive earnings reports, ahead of the Federal Reserve's interest rate decision.

- **Chinese Manufacturing:** Activity declined to a five-month low in July, heightening expectations of more stimulus.

- **Eurozone Inflation:** Headline annual inflation unexpectedly rose to 2.6 percent in July from 2.5 percent in June, according to Eurostat's flash estimate.

- **Germany's Market:** The DAX Index increased by 0.6 percent.

- **UK's Market:** The FTSE 100 Index rose by 1.2 percent.

- **France's Market:** The CAC 40 Index also climbed by 1.2 percent.

### Corporate News

- **ASML:** Shares rallied 5.5 percent following reports of potential exemptions from export restrictions.

- **HSBC Holdings:** The bank's shares gained 4 percent in London after announcing a share buyback of up to $3 billion and a stable first-half profit.

- **Ferrexpo:** Mining firm's shares soared 12 percent as half-year profits more than doubled.

- **Ricardo:** The engineering and environmental consulting firm's shares rose 4 percent after reporting trading in line with expectations for FY23/24.

- **Shaftesbury Capital:** Shares increased 2.2 percent following robust interim results.

- **Taylor Wimpey:** The real estate group raised its house sales outlook, increasing shares by 1.3 percent.

- **GSK:** Shares fell 1.5 percent after reporting a drop in second-quarter profit attributable to shareholders, from 1.62 billion pounds to 1.17 billion pounds.

- **Danone:** The yogurt maker's shares jumped 4.4 percent in Paris after reporting better-than-expected revenue growth in the second quarter.

These movements underscore the dynamic and interconnected nature of global markets, influenced by policy decisions, economic data, and corporate performance.**European Market Movements**

Airbus, recognized as the largest aircraft manufacturer globally, experienced a 3.3% increase, while Safran, a producer of jet engines and equipment, saw a decline of 1.6% following the release of their half-year financial results.

Schneider Electric, a leading entity in energy management and automation, surged nearly 3% upon reporting higher-than-anticipated H1 earnings and subsequently raising its future outlook.

Adidas saw a modest gain of 1% as the German sportswear behemoth reaffirmed its preliminary second-quarter data and maintained its annual sales and earnings guidance.

The healthcare conglomerate Fresenius rose by 2.2%, having surpassed Q2 expectations and reaffirmed its outlook for FY2024.

TeamViewer, a leader in remote connectivity solutions, jumped over 10% as it reiterated its annual revenue forecast post an impressive Q2 revenue performance.

In contrast, Siemens Healthineers, a medical technology company, saw a significant drop of 6.4% after falling short of Q3 sales and earnings projections.

**U.S. Economic Reports**

In the U.S., private sector employment saw a lower-than-expected increase in July, as reported by payroll processor ADP on Wednesday. According to ADP, private sector employment rose by 122,000 jobs in July, following a revised increase of 155,000 jobs in June. Economists had forecasted a rise of 150,000 jobs, in line with the initially reported growth for June.

At 9:45 am ET, MNI Indicators is set to release its July report on business activity in the Chicago area. The Chicago business barometer is projected to decline to 44.5 in July from 47.4 in June, with numbers below 50 suggesting a contraction.

The National Association of Realtors will be issuing a report on June's pending home sales at 10 am ET, with predictions indicating a 1.3% rise after a 2.1% decrease in May.

The Energy Information Administration is expected to release its weekly oil inventory report at 10:30 am ET for the week ending July 26th. Analysts anticipate a reduction of 1.6 million barrels following a 3.7 million-barrel reduction the previous week.

Later in the day, at 2 pm ET, the Federal Reserve will announce its monetary policy decision, followed by a press conference with Fed Chair Jerome Powell at 2:30 pm ET.