Markets Hold Steady Ahead of Fed Decision Amid Earnings Rush and Geopolitical Uncertainty

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Index Update:  U.S. stock futures were steady as investors awaited the Federal Reserve's policy decision, with expectations for rates to remain unchanged and focus on signals for a possible September cut. Markets also looked ahead to key corporate earnings, including reports from Meta, Microsoft, and others. In after-hours trading, Starbucks rose on strong results, while Visa declined despite solid earnings. Major indexes fell on Tuesday, breaking a recent winning streak amid mixed earnings and ongoing US-China trade uncertainty.

Market Movers:  On Tuesday, the top gainers were Newegg Commerce, Inc. (+43.78%), followed by Rich Sparkle Holdings Limited. (+43.06%). On the contrary AIM ImmunoTech Inc. (-56.25%) and Bakkt Holdings, Inc. (-41.76%) declined the most the same day.

Commodities Update:  Oil prices remained at five-week highs, with WTI above $69 and Brent near $72.5 per barrel, driven by geopolitical tensions and supply concerns. President Trump’s ultimatum to Russia to end the Ukraine conflict within ten days, backed by threats of 100% secondary tariffs, raised fears of disrupted Russian crude flows. The US–EU trade deal further supported oil by averting a broader trade war, though a surprise build in U.S. crude inventories capped gains. Gold hovered around $3,320 per ounce, near a three-week low, as easing global trade tensions reduced demand for safe-haven assets. The US–EU agreement helped avert wider trade conflict, while ongoing negotiations with other nations and a possible US-China tariff truce extension added to market optimism. Investors are also focused on the Fed’s policy announcement and upcoming economic data for further direction.

Macro Update:  U.S. mortgage applications dropped 3.8% in the fourth week of July, hitting their lowest level since May, as economic and labor market uncertainty continued to dampen homebuyer confidence despite slightly lower mortgage rates. Purchase applications fell by 6%, while refinancing applications declined 1%. The average 30-year fixed mortgage rate dipped slightly to 6.83% from 6.84%, remaining near a four-week high. The U.S. economy is projected to grow at an annualized rate of 2.4% in Q2 2025, rebounding from a 0.5% contraction in Q1 caused by a surge in imports ahead of tariff hikes. Growth is expected to be driven by strong consumer spending, government outlays, and intellectual property investment, while a sharp drop in imports should boost net trade. However, weakness in construction and equipment investment may weigh on overall growth. The Fed has revised its 2025 GDP growth forecast downward to 1.4% from 1.7%. Fed Expected to Hold Rates Steady Amid Inflation and Political Pressure

The Federal Reserve is likely to keep interest rates unchanged for a fifth straight meeting, balancing persistent inflation—now at 2.7%—against political and economic uncertainties. While inflation has ticked higher, the labor market remains solid but slowing. Markets anticipate a rate cut in September, with potential easing of up to 100 basis points over the next year. Meanwhile, President Trump’s increasing pressure on the Fed to slash rates to 1% has raised concerns about the central bank's independence.

Bonds Commentary:  The 10-year U.S. Treasury yield held near 4.33% as investors remained cautious ahead of the Federal Reserve's policy announcement, with expectations for steady rates but close attention on signals of a possible September cut. Political pressure from President Trump and potential dissent from key Fed governors added to uncertainty. Markets also awaited key economic data, while unresolved U.S.-China trade talks further clouded the outlook.

Dollar Commentary:  The U.S. dollar index slipped to 98.7, ending a four-day rally, as investors grew cautious ahead of the Federal Reserve’s policy decision. While the Fed is expected to keep rates steady, markets are watching for signs of a possible September cut amid continued pressure from President Trump. Potential dissent from key Fed governors and uncertainty over U.S.-China trade talks, which ended without a truce extension, also weighed on sentiment. Investors are closely monitoring upcoming economic data to gauge the economy’s strength.

Futures Update:  U.S. stock futures moved slightly higher as investors looked ahead to a wave of major corporate earnings and the Federal Reserve’s interest rate decision. This followed a modest decline in the main indexes, with the S&P 500 and Nasdaq Composite pulling back from recent record highs.

After early gains, stocks pulled back throughout Tuesday’s trading session, ending in negative territory. The S&P 500 fell 18.89 points (0.30%) to close at 6,370.87. Technicals show resistance at higher levels and signs of further decline, especially ahead of the Federal Reserve’s policy announcement on Wednesday, which may increase market volatility. The 14-day RSI remains overbought, indicating some profit-taking, but key moving averages below current levels offer support. Critical support is around 6,320, with resistance near 6,466.