On a pivotal trading day, US benchmark equity indexes displayed mixed performances as the Federal Reserve commenced its crucial two-day monetary policy meeting. Investors, keenly anticipating financial results from tech giant Microsoft, turned their attention to market fluctuations. The Nasdaq Composite index experienced a notable decline of 1.6%, settling at 17,103.7 in midday trading on Tuesday, while the S&P 500 index fell by 0.8% to reach 5,422.5.
In contrast, the Dow Jones Industrial Average recorded a slight gain, rising 0.2% to 40,613.8. Sector-wise analysis revealed that technology bore the brunt of losses, while energy sectors managed to outpace the others with gains. The Federal Open Market Committee (FOMC) is set to unveil its latest monetary policy decision on Wednesday.
According to insights from the CME FedWatch tool, market expectations lean towards the central bank maintaining steady interest rates. Investors are now looking to the FOMC's forthcoming statement, as well as comments from Fed Chair Jerome Powell during his press conference for potential signals regarding a rate cut in September.
Stifel, in a recent note to clients, remarked that July remains too early for any policy adjustments. Furthermore, even if discussions of rate cuts arise in September, an exceptionally robust case will need to be made based on data from July and August, particularly regarding inflation trends. Amid these market dynamics, the yield on US two-year Treasuries decreased by 3.7 basis points to 4.35%, while the yield on the ten-year Treasury fell 3.2 basis points to 4.14%.
Meanwhile, Microsoft is scheduled to disclose its quarterly financial results post the Tuesday market close, alongside fellow tech entity Advanced Micro Devices (AMD) and several others. In corporate news, pharmaceutical company Merck adjusted its 2024 earnings guidance downwards to account for costs associated with its recent Eyebiotech acquisition, despite slightly enhancing its revenue outlook midpoint.
The report showcased better-than-expected results for the second quarter, yet the company’s stock plummeted by 9.1%, marking it as the steepest decline on the Dow and the second largest on the S&P 500. Additionally, Procter & Gamble experienced a decline of 5.5%, making it the second-worst performer on the Dow.
This shift came despite the consumer goods titan reporting an annual earnings increase during its fiscal fourth quarter, as revenue diminished due to foreign currency impacts that overshadowed price and volume gains. Shares of CrowdStrike witnessed a substantial drop of nearly 11%, making it the worst performer on both the S&P 500 and the Nasdaq indices.
In further corporate developments, Delta Air Lines has engaged the services of attorney David Boies to seek damages from both CrowdStrike and Microsoft, following a significant global tech outage reported earlier this month. On Tuesday, Microsoft’s shares were down by 1.8%, positioning it among the least-performing stocks on the Dow. In a contrasting performance, PayPal emerged as the leading gainer on the Nasdaq and one of the top performers on the S&P 500, surging 8.5% after announcing stronger-than-expected second-quarter results and an updated guidance for earnings in 2024. In commodity news, West Texas Intermediate crude oil dipped 1% to $75.03 per barrel.
Economic indicators showed that US home prices saw a steady increase in May, paralleling the previous month’s rate, according to S&P Global's division, S&P Dow Jones Indices. Separately, the Federal Housing Finance Agency reported that home prices were stable on a seasonally adjusted basis in May, in the wake of a revised upward reading from the prior month indicating a 0.3% rise.
The consensus from a Bloomberg survey anticipated a 0.2% increase. In the precious metals market, gold prices increased by 1.2% to $2,406.20 per troy ounce, while silver prices saw a boost of 2.3% to $28.50 per ounce..