Morning in New York: Fed rate hike and megacaps

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Capital Markets Research, Freedom Broker.

The main event this Wednesday will be the Fed's rate decision (consensus: 3.75%, unchanged). The focus will also be on the press conference of the head of the regulator Jerome Powell. No significant signals regarding the future course of monetary policy (MPC) are expected, but it is important for market participants to evaluate the Fed Chairman's rhetoric. This is likely to be Powell's last press conference as Kevin Warsh will replace him in May. We still see room for two rate cuts in 2026, while futures pause the regulator's actions until 2027.

In the macro calendar, the data on durable goods orders for March (consensus: +0.5%, February: -1.3%) and core capex (consensus: +0.5%, previous month: +0.7%) are of interest. However, these statistics will not have a decisive impact on the market dynamics.

The trades will be held in anticipation of the reports of the largest technological corporations. The consensus assumes the continuation of steady growth rates, but after an intense rally in the AI segment, the market's demands for it have noticeably increased. Not only strong results are expected, but also confirmation that AI investments are already translating into revenue and profits. For Microsoft (MSFT) , investors care about the dynamics of Azure. For Alphabet (GOOGL) , Google Cloud results and advertising revenue will be most important. For Meta Platforms (META) , monetization efficiency and cost control are essential. For Amazon (AMZN), AWS growth rates and retail division margins. Comments on capital investments of these companies will influence the dynamics of chipmakers' capitalization. At the same time, against the background of news about possible internal problems of OpenAI, doubts in the investment community about the sustainability of the current development rates of the AI segment have increased. In this regard, the reaction to the reports will be acute, which will contribute to increased volatility.

The foreign policy agenda remains a factor of pressure. The U.S. is increasing sanctions pressure on Iran, including measures against Chinese independent refineries, banks and transportation infrastructure related to oil exports from the Islamic Republic. According to media reports, Washington is also preparing to extend the naval blockade in order to push for the opening of the Strait of Hormuz, which supports the upward trend in energy prices and intensifies the associated inflation risks. WTI is up 3.5%, trading at a two-week high of $103.5 per barrel.

AstraZeneca (AZN) reported for the quarter. AbbVie (ABBV), Regeneron (REGN), Amphenol (APH), Phillips 66 (PSX), Avis Budget (CAR) and SoFi Technologies (SOFI) will also report quarterly results before the open. Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN), Alphabet (GOOGL), Qualcomm (QCOM), Carvana (CVNA), and Equinix (EQIX ) will have results at the postmarket.

S&P 500 futures are consolidating, reflecting a balance between restrained optimism about reports from leading technology companies and inflationary pressures that are causing a rally in energy prices. We assess the balance of risks for the upcoming session as neutral with moderate volatility, as megacap results will be released after the end of the main trading session.

- Seagate Technology (STX) is up about 17% in reaction to the report, as well as management's increase in its long-term revenue growth target of 20% or more per year and a strong guidance for the current quarter. In addition, strong demand for storage solutions in AI infrastructure and successful results of Mozaic HAMR technology at major cloud customers supported the quotes.

- NXP Semiconductors (NXPI) shares add nearly 18% as the company reported broad-based improvement in end-market demand and accelerating sales growth for automotive and "physical AI" products. The issuer's guidance for the second quarter exceeded average market expectations.

- Shares of Visa (V) reacted with growth of about 5% to the publication of quarterly results. The corporation's net revenue increased by 17% YoY to $11.2 bln, EPS increased by 20% to $3.31. Payment volume and number of processed transactions grew 9% YoY. Revenues from value-added services increased by 27% YoY, while revenues from commercial and money movement segments grew by 24%. Additional positive factors were the share buyback program of about $33 billion and improved management forecasts.

- Starbucks (SBUX) sharesare up about 5%. Management characterized the last reported quarter as a turning point and raised its outlook for comparable sales growth (to 5%+) and EPS guidance for 2026. Investors are positive on the improved operational efficiency as well as plans to restructure the business in China.

- Bloom Energy (BE) stock is up over 19% as its quarterly EPS reached $0.44 with consensus of $0.12 and revenue increased 130% YoY. The increase in the full-year outlook reflects strong demand for off-grid energy solutions for data centers.

- Shares of Robinhood Markets (HOOD) are down about 10%. The pressure is due to expectations for operating expenses to rise to $2.7-2.8 bln, as well as investments in new business lines, despite the active development of the product ecosystem.

April 28 trades on American stock exchanges ended with a decline. S&P 500 lost 0.49%, Nasdaq 100 fell by 1.01%, Dow Jones corrected by insignificant 0.05%, and Russell 2000 dropped by 1.15%. The market was pressured by doubts about the sustainability of AI capex after reports that OpenAI failed to meet its own user and revenue targets. Additional impetus to the sell-off was given by profit taking in the securities of semiconductor manufacturers after an 18-day rally. Quotes of Nvidia (NVDA: -1.59% at the close of trading on April 28) and Advanced Micro Devices (AMD: -3.41%) reflected investors' growing concern about the pace of AI monetization.

Most securities of the "Magnificent Seven" traded in the negative zone. The energy sector (XLE: +1.66%) became the leader of growth on the background of WTI oil quotations increase by 3.7%, up to more than $100 per barrel. The IT industry (XLK: -1.69%) was the outsider amid the mentioned sell-offs in the segment of chipmakers and developers of AI infrastructure.

Macrostatistics was moderately positive. The Conference Board Consumer Confidence Index for April exceeded expectations and reached its highest level since December. Both current conditions and forecasts improved. Inflation expectations on the year horizon declined slightly. Weekly ADP data pointed to a slowdown in hiring growth. The S&P Case-Shiller and FHFA home price indexes for February declined.

The conflict between the U.S. and Iran intensifies fears of a sustained deficit in the physical oil market. An additional factor of uncertainty was the UAE's announcement of its withdrawal from OPEC in order to increase production of hydrocarbons in accordance with its own strategy. Against this background, UST yields rose by 3-4 bps at the short end of the curve. In addition, investors took a more cautious stance ahead of the FOMC rate decision and Jerome Powell's press conference.

- Coca-Cola (KO: +3.9% at the close of trading on April 28) reported organic revenue growth above forecasts due to higher volumes and price increases. EPS guidance for 2026 improved and revenue and FCF guidance reaffirmed.

- General Motors (GM: +1.3%) beat EBIT expectations by more than 40% and raised full-year guidance by about 11.5% at the midpoint of the range. An additional positive driver was the expected return of about $0.5 bln of losses from import tariffs following the US Supreme Court decision.

- Spotify (SPOT: -12.4%) posted mixed results. Its operating profit beat the consensus. At the same time, the advertising segment came under pressure, with average revenue per user (ARPU) and margins falling short of average forecasts and management giving a cautious guidance for the current quarter.

- United Parcel Service (UPS: -4%) reported revenue and earnings above average expectations, but investors focused on weak domestic margins (around 4%) and management's continued conservative outlook.

- Corning (GLW: -8.9%) investors were alerted by weak free cash flow and additional costs associated with the shutdown of production facilities, although the company's revenue beat consensus.

This article was AI-translated and verified by a human editor