US Stocks On Track For Nervous Start As Traders Go Fed Watching: AMD Earnings Calm Investors

Zinger Key Points
  • The January effect has increased hopes for a positive performance by the markets this year.
  • Earnings continue to mostly surprise to the upside, allaying fears concerning a profit recession.

Futures trading point to a negative start by Wall Street stocks on Wednesday as traders exercise restraint ahead of the Fed decision due in the afternoon.

Cues From Tuesday’s Trading:

Stocks closed notably higher on Tuesday, capping off a strong January, as positive reactions to earnings from companies, including General Motors Corp. GM and Exxon Mobil XOM, lifted the market mood. Ahead of Wednesday’s rate decision, traders also took heart from a Labor Department report showing a smaller-than-expected increase in compensation in the fourth quarter.

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The major averages opened modestly higher and climbed steadily until late trading when a late-session buying surge increased the tempo of the rally. The S&P 500 Index settled at a two-month high and the Dow Industrials ended at its highest level since mid-January.

Material, consumer discretionary and real estate led the gains on a day the market witnessed a broad-based rally.

U.S. Indices' Performance On Tuesday
Index Performance (+/-)   Value
Nasdaq Composite +1.67%   11,584.55
S&P 500 Index +1.46%   4,076.60
Dow Industrials +1.09%   34,086.04

For January, the Nasdaq Composite, S&P 500 and Dow Industrials were up 10.68%, 6.18% and 2.83%, respectively. The tech-heavy Nasdaq Composite had its best January since 2001, CNBC reported.

Analyst Color:

The slower-than-expected rise in the employment cost index was the main catalyst that pushed stocks higher on Tuesday, said Ryan Detrick, chief investment strategist at Carson Group. He attributed the rally since October to inflation that has come down quicker than most expected.

Detrick also shared data that showed that over 5% gain in January following a down year has been historically bullish. The full year has finished higher five out of the five times, with the average gains close to 30%, he said.

Futures Today:

U.S. Futures' Performance On Wednesday
Index Performance (+/-)  
Nasdaq 100 Futures -0.21%  
S&P 500 Futures -0.32%  
Dow Futures -0.37%  
R2K Futures +0.15%  

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY fell 0.32%, to $405.19, and the Invesco QQQ Trust QQQ retreated 0.19%, to $294.06, according to Benzinga Pro data.

Upcoming Economic Data:

The Mortgage Bankers’ Association will release the customary weekly mortgage application volume data at 7 a.m. EST. The market composite index, a measure of mortgage loan application volume, rose 7% week-over-week in the week ended Jan. 20, as the 30-year fixed mortgage rate slipped to the lowest level since September.

ADP is scheduled to release its private payroll data for January at 8:15 a.m. EST. The private sector in the U.S. may have added 178,000 jobs in January, down from the 235,000 pace in December.

S&P U.S. manufacturing purchasing managers’ index, or PMI, for January is due at 9:45 a.m. EST. The headline index is expected to remain unchanged at the depressed level of 46.8.

The Institute of Supply Management’s manufacturing PMI, scheduled to be released at 10 a.m. EST, is expected to decline from 48.4 in December to 48 in January.

The Energy Information Administration will release its oil inventory report for the week ended Jan. 27 at 10:30 a.m. EST.

The U.S. Federal Reserve Open Market Committee will announce its verdict on the fed funds rate at 2 p.m. EST. A post-meeting policy statement will be released around that time. Investors are discounting a slowdown in the pace of rate hikes to 25 basis points. For the market rally to continue, the central bank should send the message that monetary policy measures are working and inflation is cooling off, says analysts.

Fed Chair Jerome Powell will host a post-meeting press conference at 2:30 a.m. EST, where he is expected to explain away the rationale behind the rate decision and the outlook.

Stocks In Focus:

  • Inc. AI was finding follow-through buying interest and traded about 6% higher in premarket trading. The stock jumped 21.78% on Tuesday on announcing some AI software tools.
  • Advanced Micro Devices Inc. AMD rose over 3% following better-than-feared fourth-quarter results and positive analysts’ actions in reaction to the report.
  • Electronic Arts Inc. EA plunged over 11%, Match Group Inc. MTCH fell over 8.5% and Snap Inc. SNAP plunged about 15%, all reacting to their earnings reports.
  • Humana Inc. HUM and Novartis Inc. NVS are among the noteworthy earnings reports due ahead of the market open.
  • Meta Platforms Inc. META, eBay Inc. EBAY, Boston Scientific Corp. (NYSE BSX), T-Mobile US Inc. TMUS and Qorvo Inc. QRVO are all due to report their earnings after the close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures were seeing volatility on Wednesday after rising over 1.5% on Tuesday and the 10-year U.S. Treasury slipped below 3.5%, dropping 0.044 percentage points to 3.483%.

The Asia-Pacific markets saw across-the-board strength and ended Tuesday’s session solidly higher. The positive close by Wall Street overnight set the tone for the regional markets.

European stocks showed nervousness in late morning trading, as investors await the Fed decision. Data released on Wednesday showed Eurozone inflation falling to the lowest since May 2022. The data comes a day ahead of the European Central Bank’s rate-setting meeting, in which it is widely expected to announce a 50-basis-point hike.

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Posted In: EarningsNewsGuidanceFuturesPreviewsTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsTechTrading IdeasDow IndustrialsFed rate hikeInflationJerome PowellNASDAQ CompositeS&P 500 Index
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