Market Watch: Shocking Fed Decision, BoJ Moves, Microsoft, and Meta Surprises.

Market Watch: Dow futures contract increased 0.2%, S&P 500 futures rose 0.8%, and Nasdaq 100 futures rose 1.3%.

Japan raised interest rates, focusing on Federal Reserve’s July meeting, while Wall Street is expected to end the month positively as investors digest Microsoft earnings.

 BOJ hikes, and the Fed is next… 

The Bank of Japan raised interest rates to 0.25%, signaling its commitment to unwind a decade of monetary stimulus. The hike comes amid improvements in Japanese inflation, particularly consumer spending and stronger wages.

The central bank forecasts inflation will climb to its 2% annual target sustainably, necessitating monetary tightening. The Federal Reserve is expected to maintain its benchmark overnight interest rate in the current range.

Meta expected to see jump in revenue

Meta Platforms, the parent company of Facebook, Instagram, Threads, and WhatsApp, is expected to report a 20% increase in quarterly revenue, largely due to strong ad sales influenced by the Olympics and elections. However, investors are concerned about the return on the billions spent on AI infrastructure. Analysts believe Reels, Messaging, and AI-driven ad improvements could lead to positive product surprises and revenue upside.

Microsoft weak earnings

Microsoft’s fourth-quarter update showed a slowdown in its cloud business, Azure, which is a barometer for AI demand. The company’s capital spending increased to $19 billion, nearly double the previous year’s figure.

AI-related growth accounted for 8% of Azure’s total growth. However, Advanced Micro Devices increased its 2024 forecast for artificial intelligence chip sales by $500 million and said supplies would remain tight through 2025.

Economic Calendar

• 07:00 AM MBA Mortgage Applications
• 08:15 AM ADP Jobs Report
• 08:30 AM Treasury Refunding Announcement
• 08:30 AM Employment Cost Index
• 09:45 AM Chicago PMI
• 10:00 AM Pending Home Sales Index
• 10:30 AM EIA Petroleum Inventories
• 02:00 PM FOMC Announcement
• 02:30 PM Fed Chairman Press Conference
• 03:00 PM Farm Prices

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Recent data indicating a possible cooling in the U.S. economy have alleviated some persistent inflation concerns, fueling hopes that the Federal Reserve will start to bring interest rates down from more than two-decade highs as soon as September. Along with the Dow, the benchmark  and tech-heavytouched record marks last week.

The durability of the strength on Wall Street will likely be tested by a fresh batch of corporate results this week, including quarterly returns from artificial intelligence darling Nvidia (see below). Durable goods and consumer sentiment data will also be in focus as markets hunt for more evidence that growth is moderating enough to give the Fed justification for rolling out rate cuts this year.

Recent data indicating a possible cooling in the U.S. economy have alleviated some persistent inflation concerns, fueling hopes that the Federal Reserve will start to bring interest rates down from more than two-decade highs as soon as September. Along with the Dow,

The durability of the strength on Wall Street will likely be tested by a fresh batch of corporate results this week, including quarterly returns from artificial intelligence darling Nvidia (see below). Durable goods and consumer sentiment data will also be in focus as markets hunt for more evidence that growth is moderating enough to give the Fed justification for rolling out rate cuts this year.

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MFitch Ratings has downgraded China’s credit rating outlook to “Negative” from “Stable” due to concerns over growing public debt and slowing growth in the world’s second-largest economy. The agency affirmed China’s rating at A+, citing increasing risks to China’s public finance outlook. Concerns over slowing economic growth have grown in recent months, with Fitch expecting gross domestic product growth to fall to 4.5% in 2024.

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U.S. inflation data for February is expected to provide insights into the future direction of Federal Reserve monetary policy. The overall consumer price index (CPI) is expected to match the previous month’s pace of 3.1% annually, with the core CPI expected to slow to 3.7% from 3.9% in January. However, the month-on-month gauge is expected to shed light on price gains momentum.

Fed officials have made cooling inflation the main objective of interest rate hikes, which have brought borrowing costs to over two-decade highs. They suggest cuts may be coming later this year, but need more evidence that price growth is sustainablely easing back down to their 2% annualized target. Analysts at ING believe inflation is likely too hot for comfort.

U.S. inflation data for February is expected to provide insights into the future direction of Federal Reserve monetary policy. The overall consumer price index (CPI) is expected to match the previous month’s pace of 3.1% annually, with the core CPI expected to slow to 3.7% from 3.9% in January. However, the month-on-month gauge is expected to shed light on price gains momentum.

Fed officials have made cooling inflation the main objective of interest rate hikes, which have brought borrowing costs to over two-decade highs. They suggest cuts may be coming later this year, but need more evidence that price growth is sustainablely easing back down to their 2% annualized target. Analysts at ING believe inflation is likely too hot for comfort.