Good morning, investors. Today, all eyes are on the Federal Reserve as anticipation builds around a potential rate cut. Meanwhile, tech stocks are making a surprising rebound despite Microsoft’s underwhelming earnings report. On the political front, Vice President Kamala Harris has closed the polling gap with Donald Trump in pivotal swing states. Here’s what’s driving the markets today:
1. Global Market Rally
Global equities surged, with Nasdaq 100 futures leading the charge as positive news fueled a tech stock rebound. The yen gained strength after Japan raised interest rates, and oil prices continued to climb amid escalating tensions in the Middle East. All eyes are on Federal Reserve Chair Jerome Powell, who is expected to hint at a possible rate cut in September.
2. Fed’s Next Move in Focus
Federal Reserve officials are poised to signal a rate cut in September, marking a potential shift from the two-decade high in interest rates. While details may remain scarce, the market is eagerly awaiting insights from today’s Federal Open Market Committee (FOMC) meeting. Meanwhile, unexpected inflation upticks in the eurozone could complicate the European Central Bank’s rate cut considerations in September.
3. Semiconductor Stocks Soar
Semiconductor shares surged after reports that the U.S. plans to exempt chip-equipment makers in Japan, the Netherlands, and South Korea from upcoming export restrictions. Despite these exemptions, the Biden administration remains under pressure to curb China’s tech advancements, suggesting ongoing constraints for companies selling to Chinese firms.
4. AI Investments Under Scrutiny
Microsoft’s pre-market dip highlights concerns after Azure, its cloud-computing powerhouse, posted slower growth. However, optimism remains as Advanced Micro Devices (AMD) saw gains following a strong revenue forecast. Investors now turn their focus to Meta Platforms, whose AI investments will be under the microscope when it reports earnings later today.
5. Swing States in Play
Kamala Harris has closed the gap with Donald Trump in seven critical battleground states, according to the latest Bloomberg News/Morning Consult poll. Harris now leads by a razor-thin margin, signaling the potential effectiveness of the Democrats’ bold strategy to shift the ticket away from President Biden.
What We’ve Been Reading
Here are some stories that caught our attention in the last 24 hours:
- Kyiv suffers its largest drone attack this year.
- Donald Trump intensifies attacks on Kamala Harris as the election battle heats up.
- Outgoing HSBC CEO Noel Quinn announces an additional $3 billion return to shareholders.
- Intel prepares to cut thousands of jobs in a cost-reduction effort.
- FTSE 100 hits a two-month high while gilts rally ahead of the Bank of England’s rate decision.
Morning Insights: The Fed’s Balancing Act
As we await the Fed’s decision, it’s clear that Jerome Powell is navigating a delicate situation. Recent data, including JOLTS and the Conference Board Consumer Sentiment survey, indicates a cooling labor market. Both the Quit Rate and the Labor Differential Index are trending below pre-pandemic levels, raising questions about how much more the job market will cool and whether the Fed can engineer a soft landing.
