Stock Market Today – Wednesday, July 27: What You Need to Know

Stocks Finish in the Green; Federal Reserve May Slowdown Rate Hikes

Last Updated 4:15 PM EST

Stock indices finished today’s trading session strongly in the green following the Federal Reserve’s interest rate hike of 75 basis points. Jerome Powell stated that rate increases will likely slow down, meaning that the Federal Reserve might not be as aggressive as most had believed. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 increased 1.37%, 2.61%, and 4.26%, respectively.

The utilities sector (XLU) was the session’s laggard, as it increased by only 0.08%. Conversely, the technology sector was the session’s leader, with a gain of 4.29%. In addition, WTI crude oil increased 2.7%, as it hovers just above $98 per barrel. It is currently near the session high of $98.56 per barrel.

Furthermore, the U.S. 10-Year Treasury yield decreased to 2.79%, while the Two-Year Treasury yield also fell, as it hovers around 2.99%. This brings the spread between them to -20 basis points. The negative spread indicates that investors still have fears of a recession.

As a result of Powell’s comments, the market is pricing in a higher chance of a lower Fed Funds rate for the end of the year when compared to last week. In fact, the market’s expectations for a rate in the range of 3.75% to 4% fell to 3.8%, which is down from last week’s expectations of 25.9%. In addition, the market is now also assigning a 44.6% probability to a range of 3.25% to 3.5%. For reference, investors had assigned a 24.1% chance a week ago.

Pending Home Sales Decrease During the Month of June

Last Updated 3:00PM EST

Stocks are in the green heading into the final hour of today’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1.2%, 2.3%, and 3.9%, respectively.

On Wednesday, the National Association of Realtors released its Pending Home Sales report, which measures the month-over-month change in the number of home sales that have yet to close but are contracted to be sold. This measure excludes homes that are newly constructed.

During June, Pending Home Sales fell significantly by 8.6% compared to May, which was substantially worse than the expected -1.5% decline. This comes after May’s report broke a six-month streak of declines that started with the December report.

In addition, the Pending Home Sales Index came in at 91, which is lower than the 112.7 reading from June 2021. This equates to an approximate decline of 19.3% on a year-over-year basis.

As a result, the overall trend in sales is downwards, as the cost of borrowing continues to increase and more houses hit the market. This has also caused houses to sit for longer periods of time on the market because there are fewer buyers who now have more options to choose from.

Core Durable Goods Orders Come in Better than Expected

Last Updated 12:15PM EST

Stocks are in the green halfway into Wednesday’s trading session. As of 12:15 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.4%, 1.5%, and 2.9%, respectively.

On Wednesday, the Census Bureau released its U.S. Core Durable Goods Orders report for the month of June, which measures the change in order value for long-lasting big-ticket items. This report excludes the impact of aircraft orders because they tend to be very volatile. Therefore, it is generally agreed upon that the core reading provides a better gauge of ordering trends.

For the month of June, Core Durable Goods Orders grew by 0.3%, which was better than the expected 0.2% on a month-over-month basis. This is down from the previous month’s reading of 0.5%.

When including aircraft orders, growth was also 1.9%, which crushed expectations of -0.5%. This demonstrates that demand for big-ticket items is still there, especially when it comes to aircraft orders, as consumers continue to spend.

However, it is important to remember that this is a lagging indicator, meaning that the current demand has the potential to be much lower as inflation continues to impact people’s purchasing power. Nonetheless, it appears that the market likes what it sees from today’s report.

Stocks are in the Green to Start Wednesday’s Trading Session

Last Updated 10:00AM EST

Stock indices are in the green 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.5%, 1.2%, and 2.3%, respectively.

The materials sector (XLB) is the laggard so far, as it is down 1%. Conversely, the technology sector (XLK) is the session’s leader with a gain of 2.8%.

WTI crude oil remains below $100 per barrel as demand for gasoline remains lower than pre-pandemic levels, which is the result of high prices at the pump. However, physical markets remain undersupplied. As a result, the price is hovering around the high-$95 per barrel range, up roughly 0.5% from the previous close.

Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 2.77%. This represents a decrease of four basis points from the previous close.

Opposite movements can be seen with the Two-Year yield, which is now at 3.06%, meaning that the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative and widening, as it currently sits at -29 basis points.

Pre-Market Update

Stock futures rose in the early hours of Wednesday as investors await the Federal Reserve’s interest rate hike slated to be announced later in the day.

Futures of the Dow Jones Industrial Average (DJIA) gained 0.52%, while those of the S&P 500 (SPX) moved 1% higher, as of  5.46 a.m. EST, Wednesday. Meanwhile, the Nasdaq 100 (NDX) futures advanced significantly by 1.57%.

The after-hour market sentiment was boosted by solid quarterly results from energy technology company Enphase Energy (ENPH), which led to a 6% rise in share prices. Moreover, restaurant chain operator Chipotle (CMG) also rose around 8% in the extended trading session.

Here’s What Happened on Tuesday

Tuesday was a busy day of mixed earnings results from major blue-chip companies. Walmart’s (WMT) profit guidance cut spurred fresh concerns about reduced discretionary spending amid high inflation and recession, and this weighed heavily on retail stocks.

Moreover, Shopify’s (SHOP) workforce downsizing news put e-commerce stocks under pressure, including Amazon (AMZN), Block (SQ), and PayPal (PYPL). General Motors (GM) also lost investors after failing to meet Wall Street’s earnings expectations

Then again, Coca-Cola (KO), McDonald’s (MCD), and General Electric (GE) jumped on solid results.

Responding to these earnings releases, as well as other macroeconomic updates, the S&P 500, the Dow, and the Nasdaq 100 fell 1.15%, 0.71%, and 1.96%, respectively.

Investors are awaiting earnings reports from Boeing (BA) and Shopify before the market opens on Wednesday. Also, Qualcomm (QCOM), Ford (F), and Meta Platforms (META) are scheduled to report after the market closes for the day.

The IMF Warns of a Global Recession

Most importantly, Wednesday will see the Federal Reserve announce its latest decision on interest rates, which is most likely to be appraised by 75 basis points.

Fears of a recession are rife in the economy and the fears were solidified by the International Monetary Fund on Tuesday. The international financial body warned of a global recession in the near future, as major economies including the U.S., China, and Europe experience a sharp slowdown. Moreover, the IMF also expects growth to slow further in 2023 as central banks tighten their monetary policies to fight stubborn inflation.

The IMF now expects global growth to decelerate to 3.2% in 2022, following a 6.1% growth in 2021. This is the third time the entity cut its 2022 growth forecast. Moreover, global growth is expected to decelerate further to 2.9% in 2023, sharply below April’s projection of a 3.6% expansion.

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