Markets are heading into the session with cautious positioning as investors brace for the Federal Reserve’s interest rate decision and a massive slate of mega-cap tech earnings. The Fed concludes its two-day policy meeting today. Markets are widely pricing in a 71% probability that rates remain unchanged and a 29% chance of a 25-basis-point rate hike.
Investors will scrutinize Fed Chair Warsh’s commentary for clues on the future rate path. Earnings season hits high gear today with Microsoft and Meta Platforms reporting after the bell, followed by Apple and Amazon tomorrow. Markets are hyper-focused on whether massive AI capital expenditure is delivering actual revenue growth.
As noted yesterday there is a loss of upward momentum, but this could be due to oncoming earnings reports from the big caps, investors are waiting to see the reports before making their move. Whatever happens over the next few days, the pattern is terminal which means it could go higher but upside is limited. The S&P 500 appears to have more upside than the FTSE 100, this suggests the earnings reports will provide the fuel to push the S&P 500 to 7800. Tech stocks don’t influence the FTSE, so the FTSE has less upside.