Nasdaq 100 sheds 2% on Fed rate decision

Today’s headlines

What’s happening: US stocks closed lower on Wednesday following the Federal Reserve’s interest rate decision.

What happened: Another selloff in chipmaker stocks sent the Nasdaq 100 lower by more than 2%.

Nasdaq 100 futures traded higher this morning, signalling an upbeat start to the index as investors weigh earnings reports from Microsoft and Meta released after the closing bell.

Why it matters: The Federal Reserve left its benchmark interest rate unchanged in the 3.50%-3.75% range after its two-day meeting that ended yesterday. While the decision was in-line with market expectations, three members of the FOMC (Federal Open Market Committee) voted for a 25-bps rate hike.

The Nasdaq 100 is down 11% from its June record high, with investors continuing to take profit and shorting AI stocks. Chipmakers Micron and SanDisk declined around 10% and 7% on Wednesday, weighing on the tech-heavy index.

In after-hours trading, Microsoft’s stock jumped around 9% after the company reported better-than-expected results for the fourth quarter, amid strength in its cloud computing and AI businesses.

Microsoft reported quarterly revenue of $90.01 billion, up 18% year-over-year and surpassing consensus estimates of $87.62 billion. Earnings came at $4.74 per share, topping Wall Street expectations of $4.24 per share.

Shares of Meta Platforms fell more than 6% although the company reported higher-than-expected revenues. Revenues of $60.80 billion topped consensus estimates of $59.50 billion. Markets punished the stock on adjusted earnings of $6.18 per share significantly missing expectations of $7.13 per share.

The Dow Jones index shed 1,153.18 points, or 2.19%, to close at 51,594.14 on Wednesday, while the S&P 500 declined 1.52% to 7,316.15. The Nasdaq 100 fell 2.06% to settle at 27,192.31.

However, Nasdaq 100 futures jumped more than 1% this morning, signalling a strong start at Wall Street today.

What to watch: Investors will keep an eye on earnings reports from tech giants Apple and Amazon after US markets close today. Earnings from Mastercard and Bristol-Myers will also remain in focus.

Data on initial jobless claims (1630 UAE Time), GDP growth rate (1630 UAE Time) and core PCE price index (1630 UAE Time) from the US will be released today. The number of people claiming jobless benefits in the US, which declined by 22,000 to 187,000 in the week to July 18, is expected to rise to 200,000 in the latest week. The core PCE price index, the Fed’s preferred gauge of underlying inflation, which surged by 3.4% year-over-year in May, is expected to rise by 3.3% in June. Analysts expect the US economy to grow by 2.2% in the second quarter, up from 2.1% in the previous quarter.

The markets today

Crude oil in focus today ahead of natural-gas stocks data

Context: Crude oil prices fell this morning but held most of the gains recorded in the previous session amid renewed US-Iran tensions.

Details: President Donald Trump announced plans threated a strong response to Iran’s attack on US forces in Jordan.

Washington and Tehran have been unable to reach an agreement, as Iran aims to retain control over the Strait of Hormuz. Rising tensions sent oil prices higher by around 7% on Wednesday.

Data released on Wednesday showed US crude inventories contracted by 7.167 million barrels to 404.5 million barrels in the week ended July 24, more than market estimates of a drawdown of 1.3 million barrels.

Strength in the US dollar weighed on crude oil prices this morning as a higher greenback makes commodities more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged higher to 100.92.

Spot price for WTI crude oil fell 1.3% to $82.49 per barrel this morning, after recording sharp gains in the previous session. Brent crude declined 1.2% to trade at $86.96 per barrel.

In other energy trading, gasoline price fell 1% to $3.1928, while heating oil fell 0.7% to $4.2066. Natural gas bucked the trend, rising 0.4% to $2.733.

What to watch: Investors will keep an eye on the ongoing US-Iran tensions.

The EIA’s data on natural gas stocks change (1830 UAE Time) will be released today. US natural gas stockpiles, which rose by 32 billion cubic feet in the week ended July 17, are expected to surge by 37 billion cubic feet in the latest week.

Other Markets: European indices closed mostly lower on Wednesday, with the DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.01%, 0.60% and 0.29%, respectively, and the FTSE 100 up by 0.34%.

The news shaping the markets

Ukraine said it hit two of Russia’s major oil refineries in its recent long-range strikes. The news sent the USD/RUB pair higher in forex trading this morning.

Australia’s private house approvals climbed 0.4% to 10,631 units in June. This being a significant deceleration from the previous month’s 2.4% surge exerted pressure on the AUD/USD forex pair.

New Zealand’s ANZ business outlook index rose to 56.1 in July from 36.6 in the previous month. The region’s business sentiment surging to its strongest level since February sent the NZD/USD pair higher in forex trading this morning.

The Hong Kong Monetary Authority left its base rate unchanged at 4.0% at its recent meeting, lending support to the USD/HKD forex pair.

UK’s car production tumbled 1.2% year-over-year to 68,200 units in June. This marked a significant deceleration from the previous month’s 3.2% gain, which sent the GBP/USD pair lower in forex trading this morning.

What else to watch today

Germany’s GDP Growth Rate (1200 UAE Time), Italy’s GDP Growth Rate (1200 UAE Time), Italy’s Unemployment Rate (1300 UAE Time), Eurozone’s GDP Growth Rate (1300 UAE Time), Eurozone Unemployment Rate (1300 UAE Time), Bank of England’s Interest Rate Decision (1500 UAE Time), BOE Gov Bailey Speaks (1530 UAE Time), US Advance GDP (1630 UAE Time), US Core PCE Price Index (1630 UAE Time), Unemployment Claims (1630 UAE Time), and Personal Income and Spending (1630 UAE Time)