Federal Reserve Chair Jerome Powell reacts as he testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on the “Semiannual Monetary Policy Report to the Congress”, on Capitol Hill in Washington, D.C., U.S., June 22, 2022.
Here are the most important news items that investors need to start their trading day:
1. Stock futures looking up
Stocks were poised to open higher on a pivotal Wednesday morning. Investors are looking for what the Fed is going to say after its two-day meeting (more on that below), and there are some key earnings on the schedule. Boeing reported before the bell, while Ford, Qualcomm and Facebook parent Meta are expected after the market close. This earnings season is replete with warnings about inflation and macroeconomic anxiety, but reports have largely been OK. About 70% of the 150-plus S&P 500 companies that have announced earnings so far have beaten Wall Street's expectations, according to FactSet.
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2. Fed decision day
The Fed wraps up its two-day policy meeting Wednesday, culminating in the central bank's latest rate hike and words from Chairman Jerome Powell. So what's this increase going to look like, three-quarters of a point, or is there still a chance for a full percentage point? The market is leaning toward the former, but some observers also expect Powell to talk somewhat tough about the need to whip inflation now, or at least over the next few months, as the economy slows. "Powell will very likely get asked about the chance of recession," said Michael Feroli, JPMorgan's chief economist. "We suspect he will say it's a risk but not a foregone conclusion."
3. Tech giants miss, market shrugs
Both Alphabet and Microsoft whiffed on the top and bottom lines when they reported earnings after the bell Tuesday. And the stocks of both companies ... rose. Microsoft did give some decent guidance for the year ahead. It didn't trim back its outlook despite economic challenges, including a slowing U.S. economy beset by historic growth in prices and the Fed's aggressive rate increases. In Alphabet's case, it looks like the Google parent's results, while bad, weren't quite as bad as feared. Investors will get more tech earnings Wednesday afternoon with Meta and Apple after the bell on Thursday.
4. Housing market blues
The fortunes have shifted dramatically for U.S. homebuilders. Sales are slowing after the market became absolutely torrid during the height of the Covid pandemic, and builders are starting to get antsy, offering more incentives. "We have to work harder to sell homes. We have to be more nimble," Pulte CEO Ryan Marshall said on a conference call. There doesn't appear to be a sign of relief in the short term, either. Mortgage demand softened again last week, according to the Mortgage Bankers Association. Rates are still high, as are prices, and while more homes have come on the market, supply remains tight.
5. Price hikes and profits at Chipotle
"The low-income consumer definitely has pulled back their purchase frequency," Chipotle CEO Brian Niccol said on the company's conference call, after the burrito giant posted its results for the second quarter. "Fortunately for Chipotle, you know, the majority of our customers are a higher household income consumer." Chipotle's profit beat Wall Street's expectations in large part due to the company hiking prices to stave off inflation. While the increases might have spooked some customers from indulging in the chain's offerings, you can see from Niccol's comment above that the company isn't too concerned about losing the lower end of the market. Indeed, Chipotle plans to raise more prices next month.
Money Report
– CNBC's Carmen Reinicke, Patti Domm, Jennifer Elias, Jordan Novet, Diana Olick and Amelia Lucas contributed to this report.
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