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Fed Meeting, Big Tech's Big Quarter, Mask Warning - What's Moving Markets

Published 2021/07/28, 13:00
© Reuters.

By Geoffrey Smith 

Investing.com -- The Federal Reserve announces its policy decisions and, perhaps, some new guidance on the path of interest rates and bond purchases. Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) all report staggering second-quarter profits, while Facebook (NASDAQ:FB) is due to report after the close. China's manic selling slows as state media try to calm investors down. Surging case numbers force the U.S. to tighten its stance on masking up, while oil is firm after a strong draw on U.S. stockpiles. Here's what you need to know in financial markets on Wednesday, 28th July.

1. Fed to update on guidance

The Federal Reserve will tell the world whether it’s changed its mind about the timing when to reduce its bond purchases and raise interest rates, at the end of its latest two-day policy meeting.

The Federal Open Market Committee will release its policy statement at 2 PM ET (1800 GMT), while Chairman Jerome Powell will hold his regular press conference half an hour later.

The spread of the Delta variant across the U.S. (see below) and supply-side obstacles to growth such as component and labor shortages may have cooled any enthusiasm for an early ‘tapering’ of bond purchases. Goldman Sachs (NYSE:GS) analysts cut their growth forecasts for the next two quarters by a full percentage point earlier this week, citing such factors.

2. Big Tech's Big Quarter

The megacap tech companies continue to generate more cash than even the most optimistic expectations. Apple, Alphabet and Microsoft all reported record quarters after the closing bell on Tuesday, with a combined profit of $57 billion, which equates to $626 million a day.

Alphabet in particular impressed, thanks to roaring demand for advertising across its various platforms, a reflection of companies’ eagerness to capture their share of pent-up demand as the U.S. and other economies reopened. The results set a high bar for Facebook, which reports after the close on Wednesday.

Apple, however, wasn’t quite able to banish the threat of chip shortages, and also said that it expects growth in its services revenue to slow from now on.

3. Stocks set to open mixed. Facebook, McDonald's earnings due

U.S. stock markets are set to open mixed later, again taking their lead from China, where the manic selling of Monday and Tuesday slowed as Chinese state media tried to talk down any sense of crisis. Most mainland indices ended down moderately, but the Hang Seng index managed a 1% bounce.

By 6:15 AM ET, Dow Jones futures were down 44 points, or 0.1%, while S&P 500 futures were up less than 0.1% and Nasdaq 100 futures were up 0.1%.

Aside from the megacaps, attention may zero in later on Starbucks (NASDAQ:SBUX), which warned of slowing growth and rising costs in China, its biggest foreign market, late on Tuesday. In addition, McDonalds (NYSE:MCD) , Shopify (NYSE:SHOP), Thermo Fisher (NYSE:TMO) and Bristol Myers (NYSE:BMY) Squibb report early, while Paypal, Ford Motor (NYSE:F) and Align (NASDAQ:ALGN) all report later.

Overnight, there were strong earnings from European banks including Barclays (LON:BARC) and Deutsche Bank (DE:DBKGn), while mining giant Rio Tinto (NYSE:RIO) detailed a $9 billion dividend and buyback program after a windfall on copper and iron ore prices. Gucci owner Kering (PA:PRTP) meanwhile continued the run of impressive results from the luxury sector.

4. U.S. tightens Covid-19 policy as U.K. prepares to lift quarantine requirements

The U.S. took a step back in its fight against Covid-19, as the Center for Diseases Control and Prevention changed its guidance to advise even vaccinated people to wear a mask in certain indoor settings. It’s biggest official move in months to buck the trend of economic reopening and relaxing social distancing rules.

Additionally, President Joe Biden said he is considering an order for all federal employees to be vaccinated, which would be the clearest example yet of coercing vaccination in the name of public health. The two moves came on the day when the Covid-19 case count across the U.S. topped 100,000 for the first time since February.

There was better news further afield, at least for the vaccinated. The U.K. was reported to be on the verge of lifting its quarantine restrictions for fully-immunized travelers from both the EU and U.S., news tha sent the shares of European airlines and hotel operators higher in early trading.

5 Oil firm after inventory draw

Crude oil prices were higher overnight, sustained by the surprisingly large draw on U.S. stockpiles reported by the American Petroleum Institute. The API said crude inventories fell by 4.7 million barrels last week.

U.S. government inventory data are due at 10:30 AM ET, as usual.

By 6:15 AM ET, U.S. crude futures were up 0.3% at $71.89 a barrel, while Brent was up 0.3% at $73.75 a barrel.

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