By Mike Dolan <\/p>\n
July 29 (Reuters) – <\/p>\n
What matters in U.S. and global markets today <\/p>\n
By Mike Dolan, Editor-at-Large, Finance and Markets <\/p>\n
In a clear illustration of just how high the bar is for Big Tech to impress markets, South Korean chip giant SK Hynix plunged again as a \u200crecord six-fold jump in quarterly profits missed forecasts early on Wednesday. <\/p>\n
That’s a warning ahead of U.S. megacap earnings due out later today. Before \u200cthat, markets will digest the Federal Reserve’s latest policy decision and commentary from Chair Kevin Warsh as he takes the podium this afternoon. <\/p>\n
I’ll get into that and more below. <\/p>\n
But first, check out my \u200bmid-week column, where I discuss hyperscaler cash burn, the new British PM’s poll bounce and whether the Ukraine and Iran wars could converge. <\/p>\n
And listen to the latest episode of the Morning Bid daily podcast. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week. <\/p>\n
US PROFIT GROWTH MUSHROOMS <\/p>\n
SK Hynix plummeted nearly 10% early on Wednesday, dragging the chip-heavy KOSPI down as much as 12.6%. The index pared some of those losses to close down 6%, taking it to \u200clevels last seen in early April. Samsung is also \u2060set to report this week. <\/p>\n
Despite a resilient bounce-back in U.S. stock indexes on Tuesday amid a heavy rotation of sectors that also saw Apple briefly top $5 trillion in market value for the first time, the tremors from South Korea now create \u2060a nervier environment for investors as they wait for Microsoft and Meta’s results after the bell today. <\/p>\n
Cash burn and leverage are likely to be watched closely, after Alphabet and Tesla set alarm bells ringing last week with their high and rising AI capex. <\/p>\n
That said, the overall U.S. earnings picture is still ballooning and estimates for annual aggregate S&P 500 \u200bprofit \u200bgrowth through the second quarter are now a whopping 39% – more than 10 points higher \u200bthan estimates at the start of this month, according to \u200cLSEG data. <\/p>\n
Before we get to the earnings announcements, though, there’s the small matter of one of the most uncertain Fed decisions in years. With a one-in-three chance of an interest rate rise priced into futures – which Deutsche Bank claims is the most split the market has been ahead of a Fed meeting since 2018 – the stakes are high and multiple dissents are likely, even if rates are held. <\/p>\n
And any Fed hopes of a clearer picture from energy markets amid this week’s oil price retreat were muddied again overnight as the tense truce in the Iran conflict was broken. That saw global crude prices firm back up to \u200cmore than $87 per barrel. <\/p>\n
Washington said on Tuesday that it had conducted strikes with Saudi Arabia \u200bagainst Iran-aligned groups in Iraq, and that it had intercepted Iranian missiles launched towards U.S. bases \u200bin the Middle East. <\/p>\n
Chart of the day <\/p>\n
Despite surging U.S. corporate profit \u200bgrowth and ebullience over AI spending, U.S. household sentiment remains relatively subdued. A Conference Board survey showed its consumer confidence index \u200cslipped to 90.8 this month from 92.2 in June, confounding economists’ \u200bexpectations for a rise to 92.3. <\/p>\n
High energy \u200bprices were a factor this month, but the share of consumers viewing jobs as “plentiful” also dropped to the lowest level since February 2021. <\/p>\n
Today’s events to watch <\/p>\n
\u2022 Fed interest rate announcement (2 p.m. EDT) and press conference (2:30 p.m. EDT) <\/p>\n
\u2022 U.S. corporate earnings: Meta, Microsoft <\/p>\n
\u2022 U.S. 2-year floating rate note auction (11:30 \u200ba.m. EDT) <\/p>\n
Want to receive the Morning Bid in your \u200cinbox every weekday morning? Sign up for the newsletter here. You can find ROI on the Reuters website, and you can follow us \u200bon LinkedIn and X. <\/p>\n
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the \u200bTrust Principles, is committed to integrity, independence, and freedom from bias. <\/p>\n
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