Futures drop as eyes shift to Fed meeting, Apple
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[July 30, 2019] By
(Reuters) - U.S. stock index futures
dropped on Tuesday, as worries about the scale of consensus at the
Federal Reserve in favor of deeper cuts in interest rates ate into the
positive sentiment that drove indexes to record highs last week.
Initial price action pointed to losses of 0.2%-0.3% for the Dow and S&P,
and a big half percent fall for the Nasdaq which included a dip in
shares in Apple ahead of its quarterly results release later in the day.
Wall Street's main indexes have had a slow start to the week, retreating
on Monday, and participants are bracing themselves for what message the
Fed will send if it pushes ahead with a well-telegraphed move to ease
policy that has driven stocks higher since May.
With a quarter point reduction in rates fully priced-in, investors will
watch for how Fed Chairman Jerome Powell manages debate about whether
the stimulus is necessary and what that says about the attitude of the
U.S. central bank to doing more in the months ahead.
"The rate cut, which nearly everyone expects tomorrow, is not so much
based on current data as it is being cast as an insurance policy that is
cheap to take, so the argument goes, because price pressures are low,"
said Marc C. Chandler, Chief Market Strategist at Bannockburn Global
With inflation data due later on Tuesday, he pointed to an uptick in
core inflation since January which the Fed could emphasize as a way of
quelling expectations for more action.
As earnings season enters its third week, Apple Inc's <AAPL.O> report
after hours will provide a clear gauge on the impact of trade tensions
with China on growth. Shares of the iPhone maker dipped 0.6%.
Although trade talks between the world's two biggest economies resumed
on Tuesday, expectations among traders for any breakthrough are limited.
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Traders work on the floor at the New York Stock Exchange (NYSE) in
New York, U.S., July 29, 2019. REUTERS/Brendan McDermid
Corporate earnings so far have been robust with nearly half of all S&P 500
companies that have posted second-quarter earnings, 76.1% have beaten bottom
line estimates, according to Refinitiv data.
Goldman Sachs said on Monday it was lowering its earnings estimates for the
benchmark index <.SPX>, citing weakness in economic activity and the outlook for
margins but said Wall Street is still set to extend its decade-long bull run
into another year.
Also on tap is a Commerce Department report, due at 8:30 a.m., which is expected
to show U.S. consumer spending rose 0.3% in June after rising 0.4% in May.
The core personal consumption expenditures (PCE) data, the Fed's preferred
measure of inflation, is expected to be unchanged for the month of June.
At 7:19 a.m. ET, Dow e-minis <1YMcv1> were down 58 points, or 0.21%. S&P 500
e-minis <EScv1> were down 10 points, or 0.33% and Nasdaq 100 e-minis <NQcv1>
were down 45.25 points, or 0.57%.
Among other stocks, shares in Merck & Co Inc <MRK.N> rose 3.1% after the
drugmaker reported quarterly profit above expectations.
Procter & Gamble Co <PG.N> gained 4.1% after the consumer goods maker beat
estimates for quarterly revenue boosted by price hikes and strong demand for its
Pfizer Inc <PFE.N> was set to fall for another day, last down 2.3%, after Morgan
Stanley downgraded the drugmaker's stock to "equal-weight."
(Reporting by Shreyashi Sanyal in Bengaluru; editing by Patrick Graham)
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