Stocks are poised to rise as investors eagerly await earnings reports from major companies and the Federal Reserve’s upcoming rate decision. Companies such as Meta Platforms, Microsoft, and Alphabet are expected to reveal an end to the slowdown in their cloud businesses and benefit from a growth in digital ads. However, last week, Netflix and Tesla reported disappointing quarterly results. Nevertheless, other megacap growth and technology shares are showing positive movements.
The major event of the week is the Federal Reserve’s policy meeting, where a 25 basis points interest rate increase is expected. Economists believe this will be the last increase in the current tightening cycle, as recent data shows signs of disinflation. This news has been supporting the stock market in recent weeks. However, concerns remain about the Fed being too hawkish or earnings and forecasts being weaker than anticipated.
One factor that may contribute positively to growth stocks is the limitless demand related to generative artificial intelligence. The analysts predict a decline of 7.9% in second-quarter earnings, according to Refinitiv data.
The tech-heavy Nasdaq has outperformed its Wall Street peers, surging 34% this year. Rate-sensitive megacap growth companies have been favored, as investors are optimistic about the end of the Federal Reserve’s tightening cycle and the potential of artificial intelligence.
Pre-market trading indicates that Dow e-minis are up 0.08%, S&P 500 e-minis are up 0.15%, and Nasdaq 100 e-minis are up 0.25%. Last week, the S&P 500 and the Dow closed higher, with the latter achieving its longest winning streak since 2017. Strong quarterly reports from healthcare and financial companies contributed to these gains.
Several companies also experienced notable movements. Mattel rose 1.3% as the Barbie movie set a record for the biggest domestic debut of 2023. Warner Bros shares also increased by 1.6%. AMC Entertainment jumped 36.4% after a judge blocked the theater chain’s stock conversion plan. However, AMC’s preferred shares dropped 2.2%. Domino’s Pizza, the world’s largest pizza chain, saw its shares decline by 1.2% due to missing quarterly revenue estimates.
In an effort to address overconcentration in the benchmark, the Nasdaq exchange operator reduced the weight of a handful of companies that make up nearly half of the Nasdaq 100.
On Monday, S&P Global is expected to reveal that its flash services sector PMI fell slightly to 54.1 from 54.4 in June. However, the closely watched flash manufacturing PMI is likely to have risen to 46.4 in July from 46.3 the previous month.
