Market Snapshot: Tech Earnings Drive Optimism Amid Fed Caution and Trade Tensions

Image Source : Krish Capital Pty Ltd

Index Update:  The US 100 Tech Index traded at 23,685, up 0.16% on the day and gaining 5.37% over the past month and 25.38% over the past year. U.S. stock futures rose sharply, driven by strong earnings from tech giants Meta and Microsoft, which surged 12% and 8% respectively in after-hours trading. Meta reported robust results and a strong Q3 outlook, while Microsoft highlighted over $75 billion in Azure cloud revenue. Despite a mixed session on Wednesday, optimism returned following the Fed's decision to hold rates steady amid ongoing inflation concerns linked to recent tariff hikes. Notably, two Fed officials favored a rate cut, signaling internal divergence on policy direction.

Market Movers:  On Wednesday, the top gainers were Replimune Group, Inc (+101.33%), followed by BioNexus Gene Lab Corp (+60.99%). On the contrary Anika Therapeutics Inc (-27.42%) and Cardiff Oncology, Inc. (-24.77%) declined the most the same day.

Commodities Update:  Oil prices hovered near six-week highs, with WTI around $70 and Brent near $72 per barrel, amid growing concerns over tighter global supply. The surge followed President Trump's announcement of major trade and sanction measures targeting India, Russia, and Iran—moves that raised fears of broader disruptions in global energy markets. Meanwhile, U.S. crude inventories unexpectedly rose by 7.7 million barrels, countering expectations of a drawdown. Markets now await the OPEC+ meeting, where a notable output increase is anticipated. Despite inventory data, oil remains on track for its strongest monthly gain since September 2023.

Gold rebounded above $3,300 per ounce after dipping to a four-week low, as investors weighed recent trade developments and the Federal Reserve’s cautious stance. President Trump introduced sweeping tariff changes on imports from India, South Korea, Brazil, and others, intensifying global trade tensions. While the Fed kept interest rates steady, Chair Powell provided limited clarity on future cuts, prompting markets to price in 35 basis points of easing by year-end. Strong U.S. economic data added to the mix, with attention now turning to key inflation and labor reports due soon.

Macro Update:  The U.S. PCE price index is expected to rise by 0.3% in June 2025, the largest monthly gain in four months, signaling a pickup in inflation. Core PCE, excluding food and energy, is also projected to increase by 0.3%. Year-over-year, headline PCE inflation is forecast to accelerate to 2.5%, while core inflation is expected to remain steady at 2.7%. These figures highlight persistent inflation pressures in the Fed’s preferred gauge.

Bonds Commentary:  The 10-year U.S. Treasury yield stabilized around 4.36%, following recent volatility, as the Federal Reserve held rates steady and signaled it's too early to consider cuts. Markets responded by reducing expectations for rate cuts this year to 35 basis points. Stronger-than-expected GDP and employment data further reinforced the Fed's cautious stance. Meanwhile, the Treasury kept overall issuance steady but plans to increase long-end and TIPS buybacks, potentially easing supply pressure on longer-dated bonds. Investors now await key inflation and labor data for further policy direction.

Dollar Commentary:  The U.S. dollar index held near 99.8, close to a two-month high, after the Federal Reserve kept interest rates unchanged and signaled no imminent rate cuts. Markets scaled back expectations for easing, now pricing in just 35 basis points of cuts by year-end. The dollar was also supported by stronger-than-expected U.S. GDP and employment data. On the trade front, the U.S. struck a tariff deal with South Korea while imposing new levies on Brazil and India. The dollar index is set to gain about 3% in July, its first monthly rise of the year.

Futures Update:  U.S. stock futures climbed sharply, driven by strong earnings reports from major tech companies like Meta and Microsoft. These upbeat results helped offset concerns stemming from the Federal Reserve's indication that a potential interest rate cut in September may be delayed. The Dow, S&P 500, and Nasdaq 100 futures all posted notable gains, reflecting renewed investor optimism. Additionally, market sentiment was influenced by a new trade deal announced by President Donald Trump ahead of the approaching deadline for implementing measures against "reciprocal" countries

In the wake of a modest pullback in the prior session, stock markets exhibited a lack of definitive direction throughout Wednesday’s trading day. The S&P 500 experienced a slight decline of 7.98 points, or 0.13%, closing at 6,362.89. From a technical analysis standpoint, the index continues to hover above key support levels and maintains signs of upward momentum heading into the next trading session. Despite the 14-day RSI remaining in overbought territory, bullish momentum remains intact. Support levels are reinforced by major moving averages situated below current prices, with critical support identified around 6,320 and resistance expected near 6,466.