US open: Nasdaq roars higher as tech earnings impress ,Fed decision due

US futures

Dow futures +1.06% at 34678

S&P futures +1.4% at 4423

Nasdaq futures +2.06% at 14465

In Europe

FTSE +1.7% at 7512

Dax +2.4% at 15507

Euro Stoxx +2.5% at 4181

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Nasdaq rallies on Microsoft’s stellar guidance

The Nasdaq is finally having its day. After taking an absolute beating across January, the tech heavy index is moving higher, boosted by stellar numbers from Microsoft and ahead of the Fed’s interest rate announcement.

Coming into earnings season the big question was whether tech stocks earnings would be good enough to tame the tech rout. And the early answer is yes, so far so good.

Strong numbers from Microsoft and chip maker Texas Instruments appear to be doing a good job of distracting investors from the Fed announcement later. Microsoft beat on both top and bottom line but more importantly forecast revenue for the current quarter well ahead of Wall Street’s expectations, thanks to its Cloud business.

Texas Instruments also forecast for an upbeat current quarter, with an increased focus on the more lucrative chips used in the automobile sector and industrial sectors.

The Nasdaq which dumped 2.2% yesterday is set to rebound by 2% on the open. Whether the index manages to hold onto the gains after the Fed rate decision remains to be seen.

Whilst the Fed is not expected to hike rates this month investors will be watching carefully to see how many hikes the Fed are looking at this year and what they say about the timing of reducing the balance sheet. The discussion surrounding QT revealed in the minutes last month unnerved investors.

In other corporate news:

Boeing is on the rise despite falling into a loss after two straight quarters of gains. A $3.5 billion charge incurred for longer than expected delays for 737 Dreamliner hit earnings. Boeing trades up 2%.

 

Where next for the S&P 500?

S&P 500 is extending the rebound from 4221 struck at the start of the weej. The retaking of the 20 sma and the bullish crossover on the MACD are keeping buyers optimistic of further upside. Buyers will look for a move over 4500 January 21 high, for further gains. Sellers would look for a move below 4290 yesterday’s low to target 4221.

FX markets USD rises, CAD gains ahead of BoC rate decision

The USD is rising in anticipation of a hawkish Fed later today. No rate hike is expected but preparation for a March hike is expected. The markets will be watching for comments on reducing the balance sheets – a hawkish surprise could send the USD higher

USD/CAD is trending lower ahead of the BoC interest rate decision. The market is pricing in a 70% probability that the Canadian central bank hikes rates against a backdrop of economic recovery, falling unemployment a multiple decade high inflation.

GBP/USD +0.11% at 1.3516

EUR/USD -0.17% at 1.1281

 

Oil rallies of tight supply concerns

Oil prices are extending gains from the previous session with investors monitoring geopolitical tensions in both eastern Europe and the middle east, which could disrupt supply in an already tight market.

The risk of a Russian invasion into Ukraine remains elevated. Meanwhile, Yemen’s Houthis launched a missile attack on UAE oil infrastructure on Monday, with threats of further attacks to come.

Escalating tensions and potential disruptions come as OPEC+ members struggle to ramp up oil production to upwardly revised quotas.

API data revealed a 872,000 barrel draw on inventories, double the 400,000 forecast and highlighting the tightness in the market.

The EIA crude oil stockpile data and the Fed decision latter will be in focus

WTI crude trades +0.8% at $86.06

Brent trades +0.99% at $88.22

Learn more about trading oil here.

 

Looking ahead

15:00 BoC interest rate decision

15:30 EIA crude oil inventories

19:00 Fed rate decision