Stock futures rise ahead of Fed decision

US stock futures rose, boosted by a series of better-than-expected earnings reports, as investors awaited a crucial interest rate decision from the Federal Reserve.

S&P 500 futures rose 0.8% on Wednesday, rebounding a day after the benchmark broad index fell 1.2%. Contracts for the Dow Jones Industrial Average advanced 0.4%, and futures for the technology-focused Nasdaq 100 Index jumped 1.3%.

Shares of the tech giants jumped in pre-market trading, after Microsoft and Alphabet, the parent company of Google, on Tuesday afternoon reported better earnings than investors feared.

Microsoft, despite suffering its slowest earnings growth in two years, gave an optimistic view of its full-year guidance, sending shares up 3.3%. Alphabet shares rose 4% before the opening bell after its results, which showed a slowdown in sales growth, came in better than investors had expected.

This week is a pivotal and busy week in the financial markets, and traders around the world await the interest rate decision from the Federal Reserve. The US central bank is expected to raise the federal funds rate by 0.75 percentage points, to a range between 2.25% and 2.5%, Wednesday afternoon.

Investors will be watching for any evidence from central bankers about the scale of further rate increases this year – and whether they think they will then turn around and start cutting rates next year.

The US stock market has done well on days when the Federal Reserve raised interest rates this year, Bespoke Investment Group note tuesday. However, an increase of 0.75 percentage points on Wednesday would be the Fed’s second of this size this year. The Federal Reserve has not raised interest rates so quickly since the 1980s.

We want to hear what [Fed Chairman Jerome] Seema Shah, chief global strategist at Principal Global Investors, said Powell is thinking about the inflation outlook and what he thinks about the growth outlook. “But we have to be careful. We’ve learned in the past two months that we can’t read too much into any general guidelines.”

In the bond market, the yield on the 10-year US Treasury rose to 2.796% from 2.786% on Tuesday. Yields rise when bond prices fall. The yield on the two-year bond rose from now on to 3.055% from 3.041% the day before.

Short-term yields are up this year as investors prepare for the Federal Reserve to continue raising interest rates aggressively, keeping the US Treasury yield curve inverted. This signal is often seen as a leading indicator of stagnation.

Investors are increasingly concerned that the Federal Reserve may plunge the US into recession with more hawkish policy. Thursday’s second-quarter GDP data will provide insight into the economy’s recent performance.

Evidence is mounting that the Federal Reserve has fallen far behind on inflation and needs to make up for lost time. The Wall Street Journal’s Deon Raboin explains how we got here and what the Federal Reserve is doing to catch up. Illustration: Ryan Trevis

Investors are also watching earnings results this week, the busiest of earnings season, for clues about how companies are dealing with decades-high inflation.

In Wednesday’s earnings, Shopify warned that it expects higher inflation and higher pressures on consumer wallets, and noted that the strength of the US dollar affected the results. The company posted a loss in the second quarter, sending its shares down 6.8% ahead of the market. The Wall Street Journal reported this week that the company will cut 10% of its global workforce.

Shares of Sherwin-William fell 7.6% after posting a profit drop amid lower-than-expected sales, as the paint and coatings plant struggles with rising raw material costs.

Results from Spotify Technology and Hilton Worldwide Holdings provided some good news for investors. Spotify shares rose 6.1% after the music streaming giant reported accelerating user growth and an increase in ad revenue in the second quarter. Shares of Hilton Worldwide Holdings jumped 2.8% after the hotel chain raised its full-year earnings guidance.

Qualcomm and Facebook’s original Meta Platforms will report after Wednesday’s close.

Growth and technology stocks also rose in pre-market trading. PayPal Holdings stock jumped 6.5% after the Wall Street Journal reported that activist investor Elliott Management Corp. She has a stake in the company. The Meta Index is up 2.3%, while Peloton Interactive . is up 2.3%And the

Pandemic-era darling, advancing 2.2%.

Investors in recent weeks have returned to battered tech companies, helping the Nasdaq Composite trim its year-to-date losses to 26%, based on Tuesday’s close. It still underperforms the S&P 500, which has lost 18% for the year.

Traders worked on the floor of the New York Stock Exchange on Monday.


Pictures:

Spencer Platt / Getty Images

Offshore, the Stoxx Europe 600 Index rose 0.4%. Credit Suisse shares rose 1.1% after the Swiss bank appointed a new CEO and reported earnings that were worse than analysts had expected. Deutsche Bank shares fell 2.9 percent after the bank, which reported a sharp rise in second-quarter profit, warned that the coming months would be difficult.

In energy markets, Brent crude, the international benchmark for oil prices, rose 1.1% to $100.57 a barrel.

In Asia, Hong Kong’s Hang Seng Index is down 1.1%, while China’s Shanghai Composite Index is down about 0.1%. Japan’s Nikkei 225 index rose 0.2%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

We want to hear from you