A look at the day ahead in U.S. and global markets from Mike Dolan
Buoyant Wall St stocks brace for a critical test of this year's extraordinary surge in Big Tech shares as Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) both report after the bell on Tuesday, just as Federal Reserve officials kick off their two-day policy meeting.
The mood on world markets generally was lifted by a bounce-back in ailing Chinese stocks - a delayed reaction to Monday's somewhat vague statement from the country's ruling Politburo on supporting the "tortuous" economic recovery there.
The 4% snapback in Hong Kong's Hang Seng index - still down almost 2% for the year - was driven by a 12% surge in the beaten-down property sector but only brought the overall benchmark back to where it was on July 14. The wider blue-chip CSI 300 Index snapped a six-day losing streak to pop 3% and buying from state banks propped the yuan.
In sweltering Europe, the tone was more subdued as a survey of big banks by the European Central Bank - also meeting this week - showed business demand for loans dropped in the second quarter to their lowest in the 20-year history of the poll as credit conditions tightened further. German business confidence sagged again this month too.
Euro/dollar slipped further after the reports.
All of which painted a confusing picture of the global demand pulse going into the Fed meeting, with Monday's news of ebbing U.S. business sentiment in July at least showing overall growth in activity - in contrast to the euro zone contraction.
A jump in crude oil prices to three-month highs on Monday - due to a major U.S. refinery outage and background China stimulus hopes - was twinned with a 10 basis-point spike in two-year Treasury yields on a downbeat auction to add to the messy dashboard.
Both oil and Treasury yields gave back some of those gains again today, however, with year-on-year crude price declines still tracking more than 21%. S&P500 and Nasdaq stock futures pushed higher, after fresh Wall St gains on Monday that saw Dow Jones bluechips clock an 11-day winning streak for the first time in more than six years. VIX volatility gauges subsided from two-week highs.
There was little ostensible reaction to the formal rebalancing of the Nasdaq 100 index that pared weightings of several of the big caps to reduce "over-concentration".
With the earnings season in full swing, investors now focus on readouts from mega caps Microsoft and Google-owner Alphabet's after the bell on Tuesday - with the bar high after this year's AI-infused stock surges and sky-high valuations.
The approach of Wednesday's Fed decision may limit market moves until then. As it stands, futures are fully priced for another quarter-point rate hike to the 5.25-5.50% range - and still see this as likely the last in the cycle as markets indicate less than a 50% chance of another move later in the year.
Easing expectations for 12 months time are gradually being reined in however.
Events to watch for on Tuesday:
* U.S. corporate earnings: Microsoft, Alphabet, Texas Instruments (NASDAQ:TXN), NextEra Energy (NYSE:NEE), Visa (NYSE:V), Invesco, GE, GM, Dow, Danaher (NYSE:DHR), Corning, Kimberly-Clark (NYSE:KMB), Biogen (NASDAQ:BIIB), Verizon (NYSE:VZ), Moody's, EQT, 3M (NYSE:MMM), Universal Health, Chubb (NYSE:CB), Dover, Nucor (NYSE:NUE), Paccar, Sherwin-Williams (NYSE:SHW), Archer-Daniels-Midland etc
* U.S. July consumer confidence, Richmond Fed July business survey, Philadelphia Fed July service sector, May house prices
* Federal Reserve's Federal Open Market Committee starts 2-day policy meeting - decision Wednesday
* International Monetary Fund updates World Economic Outlook
* U.S. Treasury auctions 5-year notes
(By Mike Dolan, editing by Ed Osmond, mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)