US stock futures soar ahead on Fed decision; Microsoft disappoints

Investing.com--U.S. stock futures rose Wednesday amid optimism the Federal Reserve will pave the way for a September rate cut, overshadowing disappointing earnings from Microsoft.

At 06:30 ET (10:30 GMT), Dow Jones Futures rose 150 points, or 0.4%, S&P 500 Futures gained 52 points, or 1%, and Nasdaq 100 Futures climbed 280 points, or 1.5%.

Optimism over Fed

All eyes are on the Federal Reserve Wednesday, as the U.S. central bank concludes its latest policy-setting meeting.

The Fed is widely expected to maintain its benchmark overnight interest rate in the current 5.25%-5.50% range, as it has done since last July, but investors are looking for policymakers to lay the groundwork for a September rate cut.

Futures are fully priced for a quarter-point easing in September, with a small chance of a reduction of 50 basis points, and have 66 basis points of easing priced in by Christmas.

The main Wall Street indexes ended mixed on Tuesday, and both the S&P 500 and NASDAQ Composite are on course to end the month lower, with the latter seen losing over 3%.

The Dow Jones Industrial Average, on the other hand, is on track to finish the month higher by more than 4%, as the market rotated out of the major tech stocks into companies that are smaller and more cyclically oriented.

Microsoft cloud revenue misses estimates

Aside from the Fed, investors will be digesting quarterly earnings results from a number of influential companies.

Microsoft (NASDAQ:MSFT) stock fell around 3% premarket after its fourth-quarter cloud revenue growth missed expectations.

While the firm’s overall earnings just edged past estimates for the June quarter, revenue from Azure, the company’s cloud business, grew 29%, missing estimates of 30.2% and also slowing from the 31% rise in the prior quarter. This came even as investment in AI saw capital expenditure surge by $5 billion in the quarter.

On the flip side, Advanced Micro Devices (NASDAQ:AMD) stock surged 9% premarket, while rival NVIDIA (NASDAQ:NVDA) added over 5% after AMD clocked stronger-than-expected earnings and forecast upbeat revenue for the current quarter, citing strong demand from AI.

AMD’s earnings highlighted a potential division in AI-fueled earnings - where the suppliers of AI-related equipment appeared to be faring better than their customers.

Meta Platforms next up

Meta Platforms (NASDAQ:META) becomes the latest of the mega-cap tech giants to release quarterly results this week, after the close.

Meta, which owns and operates Facebook, Instagram, Threads, and WhatsApp, among other products and services, is expected to report a 20% rise in quarterly revenue.

Other names set to release numbers include Boeing (NYSE:BA) before the bell, as well as Qualcomm (NASDAQ:QCOM), Etsy (NASDAQ:ETSY) and Carvana (NYSE:CVNA) after the close.

Crude soars on Middle East tensions

Crude prices soared Wednesday after the killing of Hamas leader Ismail Haniyeh in Iran ratcheted up tensions in the Middle East, raising the prospects of a wider conflict hitting supplies.

By 06:30 ET, the U.S. crude futures (WTI) climbed 2.5% to $76.60 a barrel, while the Brent contract rose 2.2% to $79.81 a barrel.

Multiple media reports said that Ismail Haniyeh was killed in an Israeli strike, and could mean a potential escalation in the Israel-Hamas war, which stretched into a ninth month in July.

It could also result in a resurgence in tensions between Iran and Israel, after a series of missile strikes between the two earlier this year, and furthered fears of an all-out war in the Middle East, especially after Israel carried out strikes against Lebanon-based, Iran-backed armed group Hezbollah on Tuesday.

This news has overshadowed data from the American Petroleum Institute showing on Tuesday that U.S. inventories saw a draw of nearly 4.5 million barrels last week.

The reading, if backed by official data due later in the session, would mark a fifth straight week of draws in U.S. inventories, as fuel demand remained underpinned by the travel-heavy summer season.

(Ambar Warrick contributed to this article.)

This article first appeared in Investing.com