S&P 500 hovers near record ahead of Fed, Big Tech report cards
US stocks edged higher Wednesday as a crucial stretch of economic data and earnings readouts got underway, alongside a looming interest-rate decision this afternoon and commentary from Federal Reserve Chair Jerome Powell.
The S&P 500 Index advanced 0.1% at 9:40 a.m. in New York, trading near record highs, while the technology-heavy Nasdaq 100 Index rose 0.2%. After the stock market’s furious rally from April’s lows, market pros have warned that the advance is due for a breather.
“I think the higher the market gets, the more vulnerable the market is,” said David Kelly, chief global strategist at JPMorgan Asset Management, in an interview.
US economic activity rebounded in the second quarter, easing concerns that the Trump administration’s trade wars are thwarting economic growth. Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased an annualized 3% after shrinking at a 0.5% rate in the previous period, according to preliminary government data out Wednesday.
The Fed is projected to leave borrowing costs unchanged today for a fifth-consecutive meeting, but investors will listen intently to Powell’s remarks on the US central bank’s outlook and watch out for the number of dissenting officials.
All eyes will also be on quarterly results from Microsoft Corp. and Meta Platforms Inc. after the close, offering a critical pulse check on whether the S&P 500 can sustain its rally.
Analysts expect 18.2% earnings growth for the tech sector over the next year, an ambitious feat that’s only been surpassed three times since 2011, according to data compiled by Bloomberg Intelligence strategists Gina Martin Adams and Michael Casper.
On Wednesday, 52 companies across the US equities benchmark are scheduled to report from pre- to post-market, according to Bloomberg-compiled data. Nearly 40% of the index has already unveiled results.
On the trade front, US President Donald Trump is set to make the final call on maintaining a tariff truce with China before it expires in two weeks. An extension would mark a continued stabilization in ties between the world’s two biggest economies.
Meanwhile, Barclays strategists led by Emmanuel Cau say the US stock rally has been powered by retail traders, while institutional buying has been more measured. The volume of transactions by retail investors is at historical highs. The firm says absent a growth shock, positioning is likely to help lift stocks higher in the second half of the year.
Next, the S&P 500 is heading into what has historically been its toughest stretch of the year. Over the past three decades, the benchmark has performed the worst in August and September, losing 0.7% on average in each month, compared with a 1.1% gain on average across other months, data compiled by Bloomberg shows.
Analysts attribute the pattern in part to money managers’ tendency to reassess their portfolios around this time of year.
A bevy of US firms released results late Tuesday, including Starbucks Corp. which reported net revenue for the third quarter that beat the average analyst estimate, and Visa Inc. which left its profit outlook unchanged for the rest of the fiscal year.
Elsewhere, Peloton Interactive Inc. shares climbed Wednesday after UBS Group AG analysts upgraded the company to buy from neutral, citing improved fundamentals supported by top-line growth and further cost cuts.