Stocks Wobble Ahead of Fed Meeting
29 April 2021 - 12:30AM
Dow Jones News
By Will Horner
Major U.S. stock indexes wobbled Wednesday as investors awaited
insights from the Federal Reserve on the economic recovery as well
as earnings reports from technology giants.
The broad S&P 500 ticked up 0.1% after the opening bell. The
Dow Jones Industrial Average fell 0.3%, while the technology-heavy
Nasdaq Composite dropped 0.2%, a day after tech stocks pulled
broader indexes lower.
Stocks have broadly flatlined this week despite a
better-than-expected start to the earnings season and signs of the
economy recovering. With indexes hovering close to record levels,
corporate earnings must cross a high hurdle to support stocks' rich
valuations. There is also some concern about President Biden's
planned tax hikes and the surge in coronavirus cases in India.
"The market [is waiting] to see whether we are going to get
another breakout in the economic data, how the recovery is
progressing and how much stimulus is going to go through," said
Willem Sels, global chief investment officer at HSBC Private Bank.
"We are seeing some trade off between stronger earnings now, which
is a positive, and the fear that higher taxes to come could offset
that."
Investors will also be closely monitoring comments from Fed
Chairman Jerome Powell following the conclusion of the central
bank's two-day policy meeting at 2 p.m. ET. While the Fed is widely
expected to keep interest rates and bond purchases unchanged, fund
managers are listening for any changes in Mr. Powell's tone that
might indicate a shift in discussions about monetary policy in
coming months.
"Markets are expecting him to dismiss inflation risks and move
investors away from those worries," said Altaf Kassam, head of
investment strategy for State Street Global Advisors in Europe.
"The market is also expecting him to get a bit closer to coming up
with a timeline about tightening policy, which of course he doesn't
want to do. He is going to have to say a lot without saying too
much."
Earnings will also remain in focus as investors look to see how
tech companies are coping with changing consumer habits as lockdown
restrictions ease. Apple, Facebook and chip maker Qualcomm are
expected to post results after markets close, as is Ford Motor.
"There hasn't been a huge reaction to earnings. The market had
anticipated a lot of the improvement because it is reflective of
what is happening in the economic data," said Mr. Sels. "That is
why earnings season is all about whether there are new messages,
for example, around production and input costs."
Shares of Google's parent company Alphabet gained 4.2% after
reporting results late Tuesday. The tech giant posted record sales
for the first quarter, driven by digital ad spending.
Spotify Technology slumped 9.9% after saying that user growth
had softened in the first quarter. Pinterest fell 12% after the
social media company's added fewer users than analysts
expected.
Advanced Micro Devices rose 2.1%. The chip maker late Tuesday
raised its outlook after posting better-than-expected quarterly
results. Texas Instruments fell 4.1% after the semiconductor maker
said it expected second-quarter revenue to be less than analysts
had been forecasting.
President Biden is set to outline some of his plans to raise
taxes on the highest earning Americans at a speech later Wednesday.
The plans are part of a $1.8 trillion proposal that includes new
spending on child care and education.
In bond markets, the yield on benchmark Treasurys climbed for a
fourth consecutive trading session. The yield on the 10-year note
ticked up to 1.627%, from 1.622% Tuesday. Bond yields rise as
prices fall.
Overseas, the pan-continental Stoxx Europe 600 was up 0.1% in
recent trading. Among individual stocks, Deutsche Bank jumped more
than 10% after reporting its strongest quarterly earnings in seven
years.
Most major Asian markets posted gains. Japan's Nikkei 225 rose
0.2% while Hong Kong's Hang Seng added 0.5%. The Shanghai Composite
Index rose 0.4%.
Alexander Osipovich contributed to this article.
Write to Will Horner at William.Horner@wsj.com
(END) Dow Jones Newswires
April 28, 2021 10:15 ET (14:15 GMT)
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