26-7-2023 (NEW YORK) U.S. stocks continued their upward trajectory on Tuesday amid anticipation of big tech earnings and the Federal Reserve’s policy decision on Wednesday. The Dow Jones Industrial Average rose 26.83 points, or 0.08 percent, to 35,438.07, while the S&P 500 added 12.82 points, or 0.28 percent, to 4,567.46. The Nasdaq Composite Index increased 85.69 points, or 0.61 percent, to 14,144.56.
Six of the 11 primary S&P 500 sectors ended in red, with real estate and financials leading the laggards by losing 0.74 percent and 0.73 percent, respectively. Meanwhile, materials and technology led the gainers by rising 1.76 percent and 1.19 percent, respectively.
The mixed earnings results from big-name companies such as General Motors and General Electric were digested by investors, while they waited for results from tech giants like Microsoft and Google parent Alphabet to gauge whether the enthusiasm around artificial intelligence (AI) will justify the recent market rally.
“Investors will be wanting to hear from Alphabet and Microsoft about their cloud businesses, the ongoing impact and use of AI and their general outlooks for American and global markets,” said David Sekera, Chief U.S. Market Strategist at Morningstar, in an interview with MarketWatch.
According to FactSet data, about 79 percent of the 130 S&P 500 companies that have reported second-quarter earnings so far have exceeded analysts’ expectations.
Nearly 170 companies in the S&P 500 are due to report this week, with investors counting on earnings to make decisions on where to go. This is especially true for AI-related stocks.
“Year-to-date, the combined global tech market cap has climbed by 6 trillion U.S. dollars, of which we estimate AI-related stocks have contributed roughly 2 trillion dollars. We don’t think AI is a bubble given clear use cases and solid long-term visibility, but recommend investors consider companies with clear monetization trends,” according to an analysis published by UBS Global Wealth Management on Tuesday.
The Federal Reserve began its two-day policy meeting on Tuesday, with traders overwhelmingly expecting that the Fed will raise rates by a quarter percentage point on Wednesday.
Many analysts believe that the widely expected hike might be the last in the Fed’s tightening cycle, as price pressures continue to ease recently.
“While falling inflation supports the expectations for a Fed pivot on monetary policy, it also poses a risk to nominal revenue growth and earnings,” said Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist at Morgan Stanley.
