US open: Stocks fall on Powell's comments GDP up next

U

S futures

Dow futures +0.50% at 31910

S&P futures +0.93% at 3916

Nasdaq futures +1.5% at 12269

In Europe

FTSE -0.21% at 7360

Dax +0.01% at 13190

Euro Stoxx +0.12% at 3610 

Meta disappoints, Apple Amazon to report after the close

US stocks are set to lower as investors continue to digest the latest Federal Reserve interest rate decision and look ahead to the US GDP data.

Yesterday the Fed hiked rates by 75 basis points, which was expected. However, Jerome Powell declined to provide guidance on the size of the next rate hike, given the amount of uncertainty in the economic outlook.

The Fed funds priced in a more dovish outlook following the press conference, with the market expecting a 50 basis point hike in September rather than 75 bps.

There is still plenty of economic data to get through between now and then, with two jobs reports and two inflation reports. So a lot could happen.

Attention now turns to the US GDP reading, which is expected to show that the US economy rebounded in Q2 by 0.4% annually after falling -1.6% in Q1. Two-quarters of contraction would mean that the US economy is already in contraction.

In corporate news:

Meta is falling lower after missing both revenue and earnings forecasts. This marked the first year-on-year revenue decline for the social media company. Meta reported EPS of $2.46 against forecasts of $2.54 on revenue of $28.8 billion on revenue of $28.9 billion.

Apple and Amazon are set to report after the close.

Where next for the S&P500?

The S&P500 extended its rebound from the 2022 low of 3636. The index has risen above its 50 sma, which, combined with the bullish RSI, suggests that more upside could be on the cards. Buyers will need to rise over 4040, yesterday’s high, in order to look towards 4100 round number and expose the 100 sma at 4120. On the flip side, support can be seen at 3940, the June 27 high, and at 3910 the 50 sma, a break below here could open the door to 3735, the July low.

FX markets – USD rises, EUR falls

The initial selloff in the USD following the Fed rate decision has stalled, and the USD is rebounding higher.

EURUSD is falling after dismal eurozone consumer confidence, which tumbled by more than expected in July to -27, down from -23.8. The fall in sentiment comes as recession fears rise and amid growing concerns over the energy picture. Attention now turns to German inflation data, which is expected to ease slightly to 8.1% YoY in July, down from 8.2%.

GBP/USD is falling amid rising concerns over the health of the UK economy. The latest survey from RICS showed that the commercial real estate sector is entering or may already be in a downturn. No high-impacting UK data is due to be released, so attention turns to the BoE meeting next week.

GBP/USD  -0.2% at 1.21230

EUR/USD  -0.43% at 1.0150

Oil rises after inventories drop.

Oil prices are rising, extending gains from the previous session, boosting hopes of a less aggressive Federal Reserve and falling inventories.

Recession fears eased after the market interpreted the tone of the Fed at the latest Federal Reserve meeting as being slightly more dovish.

Oil prices had fallen in recent weeks on bets that aggressive Fed tightening would tip the economy into recession, hurting the demand outlook. With aggressive Fed bets being reined in the demand outlook has improved.

Separately stockpile data showed that inventories fell by 4.5 million barrels last week, more than the 1 million barrels forecast.

WTI crude trades +1.7% at $98.48

Brent trades +1.86% at $103.64

 

Looking ahead

13:00 German inflation

13:30 USD GDP

13:30 US initial jobless claims