Morning in New York: Focus on Inflation Data, New Reports from Big Tech, and Geopolitics

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The upcoming trading session will be packed with a wide variety of news—ranging from corporate to foreign policy. Yesterday, after the market closed, the largest tech companies reported their earnings. Meta Platforms (META) disappointed with its revenue forecast, and its increased capital expenditures on AI put further pressure on free cash flow. Microsoft (MSFT) exceeded expectations in its cloud business, and its capital expenditures came in slightly below consensus, which supported a positive outlook on the return on investment in AI. Qualcomm (QCOM) and Arm Holdings (ARM) are seeing weak demand in the smartphone segment amid a shortage of memory chips and rising component costs.

The U.S. carried out airstrikes on targets in Iran after President Trump threatened a harsh response to the IRGC’s rocket attack on U.S. bases in Jordan. The oil market’s reaction to the foreign policy news was muted, as prices had already factored in the escalation and protracted nature of the conflict, as well as the difficulties in resolving it through diplomatic means. At the same time, the market does not anticipate a resumption of full-scale military operations by the U.S.

Among today’s major economic releases, the June PCE deflator data will be the most significant. Analysts at Freedom Broker forecast zero change in the overall index and a 0.2% month-over-month increase in the core index (consensus: −0.1% month-over-month and +0.2% month-over-month, respectively). Income and expenditure statistics for June will also be released, which will help refine estimates of consumer spending (consensus: +0.3% and +0.4% MoM, respectively). Our forecasts for these indicators are in line with market consensus.

We estimate U.S. GDP growth for the second quarter at an annualized rate of 1.9% (consensus: +2%). In our view, this discrepancy is primarily due to a decline in private inventories; actual GDP growth may turn out to be higher.

Following the conclusion of its meeting yesterday, the Fed, as expected, left its monetary policy parameters unchanged. Remarks by Fed Chair Kevin Warsh at the press conference offered virtually no new signals. The lack of clear guidance regarding the future course of monetary policy has heightened uncertainty about the Fed’s response to incoming macroeconomic data.

Before the start of the main trading session, Mastercard (MA), Quanta Services (PWR), Valero Energy (VLO), American Electric Power (AEP), Bristol Myers Squibb (BMY), Intercontinental Exchange (ICE), and Altria Group (MO) will report their quarterly results. After the market closes, Apple (AAPL), Amazon (AMZN), Strategy (MSTR), Monolithic Power Systems (MPWR), Coinbase Global (COIN), Reddit (RDDT), and Rivian Automotive (RIVN) will report their earnings.

U.S. stock index futures are showing moderate gains. We assess the risk balance for the upcoming session as neutral, with high volatility amid the conflict in the Middle East, the release of key macroeconomic data, and a mixed reaction to earnings reports from tech giants.

— Strong second-quarter results and an optimistic outlook drove Microsoft (MSFT) shares up by more than 7%. The company’s revenue and earnings exceeded market expectations, and growth in its Azure cloud business accelerated to 43% year-over-year, also surpassing consensus estimates. Management expects the cloud division to grow by 45% in the current quarter. The results confirmed continued strong demand for cloud services and Copilot solutions, as well as a growing return on large-scale investments in AI infrastructure.

— Meta Platforms (META) shares are down 8% following the release of mixed quarterly results. The company’s revenue rose 28% year-over-year, exceeding market expectations, but profits declined due to costs related to court rulings and restructuring programs. Additional pressure on the stock came from an increase in the investment plan for AI infrastructure development and a weaker-than-expected revenue guidance for the third quarter.

— Arm Holdings (ARM) shares are down 6%, despite a quarterly revenue forecast above consensus and continued strong demand from data centers. Investors were alarmed by the expected decline in licensing fees from smartphone manufacturers this quarter. The negative reaction was exacerbated by the company’s high valuation following a prolonged rise in its stock price.

— A weak earnings forecast for the current quarter caused Qualcomm (QCOM) shares to drop 5%. The company’s financial performance is being negatively impacted by rising component costs and an accelerating decline in revenue from its partnership with Apple (AAPL). Expansion into the automotive and Internet of Things segments has not yet offset the weak performance of the smartphone division.

— Starbucks (SBUX) shares are up 5% thanks to the accelerated rollout of its business recovery program. Comparable sales rose 7.9%, exceeding market expectations, driven by growth in customer traffic and average check. The company raised its guidance for earnings and sales for fiscal year 2026, citing shorter wait times and improved operational efficiency at its stores.

Trading on July 29 on U.S. stock markets ended with significant losses. The S&P 500 lost 1.52%, the Nasdaq 100 fell 2.06%, the Dow Jones dropped 2.19%, and the Russell 2000 fell 1.61%. The negative trend was driven by the outcome of the Fed meeting. As mentioned above, the benchmark interest rate was left unchanged; however, three members of the Federal Open Market Committee (FOMC) voted to raise it by 25 basis points. The market interpreted this as a clear “hawkish” signal that turned out to be more aggressive than expected. Federal Reserve Chair Kevin Warsh reaffirmed the commitment to bringing inflation back to the target level, but gave no indication of the timing of a possible rate change. Sell-offs in tech stocks and renewed tensions in the Middle East put additional pressure on prices. Media reports indicated a possible attack on an LNG terminal in Egypt and discussions by the Houthis regarding the imposition of fees for ships passing through the Red Sea.

The energy sector (XLE: +1.88%) led the gains, buoyed by WTI crude oil, which rose 6.6% amid the escalating U.S.-Iran conflict. The industrial (XLI: −3.19%) and IT (XLK: −2.64%) sectors were among the underperformers. Among the “Magnificent Seven,” the most actively traded stocks were Nvidia (NVDA: −3.55%) and Tesla (TSLA: −2.97%).

— Manhattan Associates (MANH: +21.3%) beat market expectations for revenue and earnings thanks to accelerated revenue growth in its cloud business and an increase in its backlog. The company noted growing customer interest in agent-based artificial intelligence solutions and raised its forecast for 2026.

— Garmin (GRMN: +16.2%) reported quarterly results that beat consensus estimates and raised its own guidance for the current year. Revenue growth was driven by strong demand for premium wearable devices, as well as solid performance from the aviation division, including revenue from component shipments and aircraft maintenance.

— GE HealthCare Technologies (GEHC: +12.2%) reported earnings and profitability for the quarter that exceeded average market expectations, driven by steady demand for diagnostic equipment and medical imaging solutions. The company reaffirmed its 2026 outlook and announced that it is exploring strategic options for the Patient Care Solutions division.

— SoFi Technologies (SOFI: −9%) reported strong quarterly results and raised its revenue guidance for 2026, but its decision to maintain its profit guidance heightened investors’ concerns about the pace of profitability growth in the second half of the year.

— Procter & Gamble’s (PG: −1.9%) weaker-than-expected quarterly results were driven by a slowdown in organic sales growth and ongoing pressure from rising costs. The company also issued a cautious outlook for fiscal year 2027, which weighed on its stock price.

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