Wall St to open higher on Microsoft, Alphabet earnings ahead of Fed

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 26, 2022. REUTERS/Brendan McDermid

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  • Microsoft and Alphabet earnings trigger megacap stock rally
  • T-Mobile up after raising subscriber growth forecast
  • Fed policy decision expected at 2 p.m. ET
  • Boeing rises to maintain its cash target
  • Futures up: Dow 0.49%, S&P 0.88%, Nasdaq 1.42%

July 27 (Reuters) – U.S. stock indices were expected to open higher on Wednesday, with upbeat quarterly reports from Microsoft and Alphabet lifting sentiment ahead of a key U.S. interest rate decision later in the day.

Investors were nervous after a profit warning from major U.S. retailer Walmart (WMT.N) fueled fears of a broader slowdown in spending as high inflation raised costs for consumers. All three indices had closed sharply lower in the previous session.

Microsoft Corp (MSFT.O) rose 3.6% in premarket trading after forecasting revenue would grow by double digits this fiscal year on demand for cloud computing services. Read more

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Alphabet Inc (GOOGL.O) gained 4.1% as better-than-expected Google search ad sales provided relief after social media company Snap Inc (SNAP.N) warned last week that raises fears of a sharp slowdown in the advertising market. Read more

“A positive reaction from the latest quarterly figures has been incredibly hard-earned given the negative market sentiment regarding broader technology,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

The results sparked a rally in high-growth stocks. Amazon.com Inc (AMZN.O), Meta Platforms Inc (META.O) and Apple Inc (AAPL.O) topped earnings this week.

Megacap growth stocks have been hammered this year as the Federal Reserve raised interest rates aggressively to tame decades-high inflation. The future cash flows on which the valuation of these companies is based are heavily discounted when interest rates rise.

Investors widely expect the U.S. central bank to raise interest rates another 75 basis points later on Wednesday, with focus likely to shift to the depth of signs of an economic slowdown seen among its policymakers. . Read more

Money market traders were even placing about a one in four chance that the Fed would surprise markets with a larger 1 percentage point increase, according to CME Group’s Fedwatch tool.

The decision is expected at 2:00 p.m. ET (6:00 p.m. GMT) and Fed Chairman Jerome Powell’s press conference half an hour later is expected to explain how the central bank views recent economic data and at least hint at its next steps.

“If he (Powell) gets some sort of indication that inflation is under control then that’s a sign for the market that their (Fed’s) moves are working and 50 basis points are in the cards for the next meeting,” said Robert Pavlik. , Senior Portfolio Manager at Dakota Wealth Management.

As of 8:25 a.m. ET, Dow e-minis were up 154 ​​points, or 0.49%, S&P 500 e-minis were up 34.5 points, or 0.88%, and e-minis Nasdaq 100 were up 172.5 points, or 1.42%.

Shares of Boeing Co (BA.N) rose 2.9% after the plane maker stuck to its goal of generating free cash flow this year. Read more

PayPal Holdings Inc (PYPL.O) jumped 6.9% after a report said activist investor Elliott Investment Management is taking a stake in the fintech giant to push it to step up its cost reduction efforts. Read more

T-Mobile US Inc (TMUS.O) gained 3.8% after raising its subscriber growth forecast for the second time this year and beating quarterly profit forecasts. Read more

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Reporting by Sruthi Shankar and Aniruddha Ghosh in Bengaluru; Editing by Sriraj Kalluvila

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