Big Tech Earnings Week: A Crucial Test for Market Sentiment

Take Five: Scores on the doors for Big Tech

Here's your look at what's happening in markets in the coming week, from Kevin Buckland in Tokyo, Ira Iosebashvili and Rodrigo Campos in New York and Amanda Cooper in London. The steep selloff in markets in recent days is shining a spotlight on the Federal Reserve, which concludes its July monetary policy meeting on Wednesday. Signs of economic concern from the Fed could give investors - already unnerved by turbulence in U.S. tech stocks - yet another reason to worry. As it is, investors believe the time to ease monetary policy is swiftly approaching: futures tied to the Fed funds rate show investors pricing in a more than 90% chance of a September rate cut amid evidence of cooling inflation and a nascent downshift in the jobs market. U.S. employment data due Aug. 2 will give investors the opportunity to assess whether the gradual signs of slowing that bolstered rate cut expectations have continued in July. Economists polled by Reuters expect the U.S. to have created 185,000 jobs in July, compared with 206,000 in the prior month. Spooked investors also face a minefield of Big Tech earnings, with misses threatening to further upend a market roiled by worries over stretched stock valuations. Microsoft is scheduled to report earnings on Tuesday, followed by Facebook-parent Meta on Wednesday and Apple and Amazon on Thursday. Disappointing numbers could re-ignite the worries that caused a crushing selloff in U.S. stocks on Wednesday, when both the S&P 500 and Nasdaq suffered their worst day since late 2022. The huge run-up in tech stocks may have set a high bar for their results. Google-parent Alphabet, whose earnings were one of the triggers for the recent selloff, actually reported better-than-expected revenue, but investors grew wary that rising spending on AI infrastructure could squeeze margins, sending the shares 5% lower. Speculation is growing that the Bank of Japan could hike rates on Wednesday after high-profile politicians - including the prime minister - hinted at the need for near-term policy normalisation. It's not the need to end decades of extraordinary stimulus, per se, that is at the heart of their arguments. Rather, the weak yen's choking effect on households and businesses that looks to be turning the exchange rate into a central issue for the ruling Liberal Democratic Party's leadership convention in September. The fact that the currency has rebounded by a staggering 10 yen per dollar from three-decade lows at the start of the month hasn't deterred some from predicting a July hike. They argue the BOJ can get the most bang for its buck by hiking into a rallying yen. Others worry a fragile economy and weak consumer sentiment couldn't weather higher borrowing costs, with slowing U.S. growth set to have a knock-on effect already. 4/STICKY ISSUES The Bank of England meets on Thursday and right now, markets see a roughly 48% chance that rates will fall for the first time since March 2020. Growth is modest and consumer inflation has returned to 2%. Yet wage growth and service-sector inflation are proving sticky and running hotter than a number of policy-setters at the Old Lady of Threadneedle Street, as the Bank of England is known, would like. Clare Lombardelli, the new deputy governor, may hold the deciding vote, as the other eight Monetary Policy Committee members are split evenly on whether to hold or cut. British consumers might be feeling the pinch of interest rates at more than 14-year highs, but banks have certainly reaped the benefits. Markets will watch results from HSBC, Barclays and Standard Chartered to get a sense of how well they are likely to fare when borrowing costs, and the profit they make on them, start to fall. 5/A MULTI-BILLION QUESTION Venezuelans will elect a president on Sunday. Opposition candidate Edmundo Gonzalez leads polls by 20 points over incumbent Nicolas Maduro, who has pledged the election will be transparent, but forced the winner of the opposition primary, Maria Corina Machado, out of the race. The results and handling of the vote is one half of the puzzle determining future U.S. sanctions on Venezuela - the battle for the White House is, of course, yet to come in November. Current curbs include a ban on buying bonds directly from Venezuela's government. That precludes, for now, a restructuring of some $60 billion in international bonds owed by the government and state-owned oil firm PDVSA. Venezuela's and PDVSA'S defaulted bonds trade at deeply distressed levels of 13-22 cents, but have rallied sharply from late last year's single-digits. Investors are watching Maduro's handling of the election very closely. (Compiled by Karin Strohecker; Pasit Kongkunakornkul, Prinz Magtulis, Vineet Sachdev and Kripa Jayaram, editing by Sharon Singleton)

Take Five: Scores on the doors for Big Tech

(Reuters) - It's a big week for central banks, with policymakers in the United States, Japan and Britain all due to reconsider lending rates and markets on edge over more earnings from U.S. tech giants. In Venezuela, voters head to the polls to elect a president. Here's your look at what's happening in markets in the coming week, from Kevin Buckland in Tokyo, Ira Iosebashvili and Rodrigo Campos in New York and Amanda Cooper in London. 1/SEPTEMBER QUESTION The steep selloff in markets in recent days is shining a spotlight on the Federal Reserve, which concludes its July monetary policy meeting on Wednesday. Signs of economic concern from the Fed could give investors - already unnerved by turbulence in U.S. tech stocks - yet another reason to worry. As it is, investors believe the time to ease monetary policy is swiftly approaching: futures tied to the Fed funds rate show investors pricing in a more than 90% chance of a September rate cut amid evidence of cooling inflation and a nascent downshift in the jobs market. U.S. employment data due Aug. 2 will give investors the opportunity to assess whether the gradual signs of slowing that bolstered rate cut expectations have continued in July. Economists polled by Reuters expect the U.S. to have created 185,000 jobs in July, compared with 206,000 in the prior month. 2/TECH TANTRUMS Spooked investors also face a minefield of Big Tech earnings, with misses threatening to further upend a market roiled by worries over stretched stock valuations. Microsoft is scheduled to report earnings on Tuesday, followed by Facebook-parent Meta on Wednesday and Apple and Amazon on Thursday. Disappointing numbers could re-ignite the worries that caused a crushing selloff in U.S. stocks on Wednesday, when both the S&P 500 and Nasdaq suffered their worst day since late 2022. The huge run-up in tech stocks may have set a high bar for their results. Google-parent Alphabet, whose earnings were one of the triggers for the recent selloff, actually reported better-than-expected revenue, but investors grew wary that rising spending on AI infrastructure could squeeze margins, sending the shares 5% lower. 3/HIKES AND SPIKES Speculation is growing that the Bank of Japan could hike rates on Wednesday after high-profile politicians - including the prime minister - hinted at the need for near-term policy normalisation. It's not the need to end decades of extraordinary stimulus, per se, that is at the heart of their arguments. Rather, the weak yen's choking effect on households and businesses that looks to be turning the exchange rate into a central issue for the ruling Liberal Democratic Party's leadership convention in September. The fact that the currency has rebounded by a staggering 10 yen per dollar from three-decade lows at the start of the month hasn't deterred some from predicting a July hike. They argue the BOJ can get the most bang for its buck by hiking into a rallying yen. Others worry a fragile economy and weak consumer sentiment couldn't weather higher borrowing costs, with slowing U.S. growth set to have a knock-on effect already. 4/STICKY ISSUES The Bank of England meets on Thursday and right now, markets see a roughly 48% chance that rates will fall for the first time since March 2020. Growth is modest and consumer inflation has returned to 2%. Yet wage growth and service-sector inflation are proving sticky and running hotter than a number of policy-setters at the Old Lady of Threadneedle Street, as the Bank of England is known, would like. Clare Lombardelli, the new deputy governor, may hold the deciding vote, as the other eight Monetary Policy Committee members are split evenly on whether to hold or cut. British consumers might be feeling the pinch of interest rates at more than 14-year highs, but banks have certainly reaped the benefits. Markets will watch results from HSBC, Barclays and Standard Chartered to get a sense of how well they are likely to fare when borrowing costs, and the profit they make on them, start to fall. 5/A MULTI-BILLION QUESTION Venezuelans will elect a president on Sunday. Opposition candidate Edmundo Gonzalez leads polls by 20 points over incumbent Nicolas Maduro, who has pledged the election will be transparent, but forced the winner of the opposition primary, Maria Corina Machado, out of the race. The results and handling of the vote is one half of the puzzle determining future U.S. sanctions on Venezuela - the battle for the White House is, of course, yet to come in November. Current curbs include a ban on buying bonds directly from Venezuela's government. That precludes, for now, a restructuring of some $60 billion in international bonds owed by the government and state-owned oil firm PDVSA. Venezuela's and PDVSA'S defaulted bonds trade at deeply distressed levels of 13-22 cents, but have rallied sharply from late last year's single-digits. Investors are watching Maduro's handling of the election very closely. (Compiled by Karin Strohecker; Pasit Kongkunakornkul, Prinz Magtulis, Vineet Sachdev and Kripa Jayaram, editing by Sharon Singleton)

5 world market themes for the week ahead

Central banks from the U.S., Japan, and Britain reassessed lending rates, while the U.S. tech earnings' impact and Venezuela's presidential elections took center stage. The Fed's rate cut expectations and Big Tech's performance were key focuses. Venezuela voted amid economic shifts and potential U.S. sanctions. Stay informed on this pivotal financial and political landscape.It's a big week for central banks, with policymakers in the United States, Japan and Britain all due to reconsider lending rates and markets on edge over more earnings from U.S. tech giants. In Venezuela, voters head to the polls to elect a president. Here's your look at what's happening in markets in the coming week, from Kevin Buckland in Tokyo, Ira Iosebashvili and Rodrigo Campos in New York and Amanda Cooper in London. The steep selloff in markets in recent days is shining a spotlight on the Federal Reserve, which concludes its July monetary policy meeting on Wednesday. Signs of economic concern from the Fed could give investors - already unnerved by turbulence in U.S. tech stocks - yet another reason to worry. As it is, investors believe the time to ease monetary policy is swiftly approaching: futures tied to the Fed funds rate show investors pricing in a more than 90% chance of a September rate cut amid evidence of cooling inflation and a nascent downshift in the jobs market. U.S. employment data due Aug. 2 will give investors the opportunity to assess whether the gradual signs of slowing that bolstered rate cut expectations have continued in July. Economists polled by Reuters expect the U.S. to have created 185,000 jobs in July, compared with 206,000 in the prior month. Spooked investors also face a minefield of Big Tech earnings, with misses threatening to further upend a market roiled by worries over stretched stock valuations. Microsoft is scheduled to report earnings on Tuesday, followed by Facebook-parent Meta on Wednesday and Apple and Amazon on Thursday. Disappointing numbers could re-ignite the worries that caused a crushing selloff in U.S. stocks on Wednesday, when both the S&P 500 and Nasdaq suffered their worst day since late 2022. The huge run-up in tech stocks may have set a high bar for their results. Google-parent Alphabet, whose earnings were one of the triggers for the recent selloff, actually reported better-than-expected revenue, but investors grew wary that rising spending on AI infrastructure could squeeze margins, sending the shares 5% lower. Speculation is growing that the Bank of Japan could hike rates on Wednesday after high-profile politicians - including the prime minister - hinted at the need for near-term policy normalisation. It's not the need to end decades of extraordinary stimulus, per se, that is at the heart of their arguments. Rather, the weak yen's choking effect on households and businesses that looks to be turning the exchange rate into a central issue for the ruling Liberal Democratic Party's leadership convention in September. The fact that the currency has rebounded by a staggering 10 yen per dollar from three-decade lows at the start of the month hasn't deterred some from predicting a July hike. They argue the BOJ can get the most bang for its buck by hiking into a rallying yen. Others worry a fragile economy and weak consumer sentiment couldn't weather higher borrowing costs, with slowing U.S. growth set to have a knock-on effect already. The Bank of England meets on Thursday and right now, markets see a roughly 48% chance that rates will fall for the first time since March 2020. Growth is modest and consumer inflation has returned to 2%. Yet wage growth and service-sector inflation are proving sticky and running hotter than a number of policy-setters at the Old Lady of Threadneedle Street, as the Bank of England is known, would like. Clare Lombardelli, the new deputy governor, may hold the deciding vote, as the other eight Monetary Policy Committee members are split evenly on whether to hold or cut. British consumers might be feeling the pinch of interest rates at more than 14-year highs, but banks have certainly reaped the benefits. Markets will watch results from HSBC , Barclays and Standard Chartered to get a sense of how well they are likely to fare when borrowing costs, and the profit they make on them, start to fall. Venezuelans will elect a president on Sunday. Opposition candidate Edmundo Gonzalez has gathered significant support against incumbent Nicolas Maduro, who has pledged the election will be transparent. The winner of the opposition primary, Maria Corina Machado, was forced out of the race. Venezuela had suffered six-digit hyperinflation for about four years, with the indicator reaching a heady 130,000%, eroding savings and making basic supplies scarce. But annual inflation fell to around 50% over the last year as the government restricted credit, held the exchange rate steady and curbed public spending. The results and handling of the vote are one half of the puzzle determining future U.S. sanctions on Venezuela - the battle for the White House is, of course, yet to come in November. Current curbs include a ban on buying bonds directly from Venezuela's government. That precludes, for now, a restructuring of some $60 billion in international bonds owed by the government and state-owned oil firm PDVSA. Venezuela's and PDVSA'S defaulted bonds trade at deeply distressed levels of 13-22 cents, but have rallied sharply from late last year's single-digits. Investors are watching Maduro's handling of the election very closely.

Wall Street Week Ahead: Spooked US stock market faces tech earnings minefield, Fed meeting

Investors faced a jittery week with crucial earnings reports from top tech giants, a Federal Reserve policy meeting, and vital employment data. Following recent market turmoil, earnings from Microsoft, Apple, and Meta Platforms, along with the Fed's possible interest rate cuts and employment figures, were anticipated to influence U.S. stock trajectories significantly.Rattled investors are bracing for earnings from the market's biggest tech companies, a Federal Reserve policy meeting and closely watched employment data in a week that could determine the near-term trajectory of U.S. stocks following a bout of severe turbulence. A months-long rally in massive tech stocks hit a wall in the second half of July, culminating in a selloff that saw the S&P 500 and Nasdaq Composite Index notch their biggest one-day losses since 2022 on Wednesday after disappointing earnings from Tesla and Google-parent Alphabet. More volatility could be ahead. Next week's results from Microsoft, Apple, Amazon.com and Facebook-parent Meta Platforms could further test investors' tolerance of potential earnings shortfalls from tech titans. The blistering rallies in the world's biggest tech companies this year pushed markets higher, but have sparked concerns about stretched valuations. Though the S&P 500 is still only about 5% below its all-time high and is up nearly 14% this year, some investors worry that Wall Street may have become too optimistic about earnings growth, leaving stocks vulnerable if companies are unable to meet expectations in coming months. Investors also will be closely watching comments following the end of the Federal Reserve's monetary policy meeting on Wednesday for clues on whether officials are set to deliver interest rate cuts, which market participants widely expect to begin in September. Employment data at the end of the week, including the closely watched monthly jobs report, could indicate if a nascent downshift in the labor market has become more severe. "This is a critical time for the markets," said Bryant VanCronkhite, a senior portfolio manager at Allspring. "You're having people start to question why they are paying so much for these AI businesses at the same time the market fears that the Fed will miss its chance to secure a soft landing, and it's causing a violent reaction." Recent weeks have shown signs of a rotation out of the high-flying tech leaders and into market sectors that have languished for much of the year, including small caps and value stocks such as financials. The Russell 1000 Value index is up more than 3% for the month-to-date while the Russell 1000 Growth index is down nearly 3%. The small-cap-focused Russell 2000 is up nearly 9% this month, while the S&P 500 has lost more than 1%. Even strong earnings may not be enough to get the broad market out of its recent malaise, at least in the near term, said Keith Lerner, chief market strategist at Truist. "The market is going to take direction based on the fact that these stocks have pulled back," he said. "My thinking is that tech came down so hard, even if you get a bounce from these names due to earnings you will have people itching to sell into any gains." And any signs that the Fed is seeing worse-than-expected deterioration of the economy could also unnerve investors, disrupting the narrative of cooling inflation but still-resilient growth that has supported markets in recent months. "We think they are going to stay with the script that they will be data dependent but the data has not been going in a straight line," said Matt Peron, global head of solutions at Janus Henderson Investors. Conflicting signs in the economy have included faster-than-expected GDP growth in the second quarter alongside declining manufacturing activity. Markets are currently pricing in a near-certainty that the Fed will begin cutting interest rates at its September meeting, and expect 66 basis points in total cuts by the end of the year, according to CME's FedWatch Tool. The employment data at the end of the week could sway those odds if it shows that the economy has been slowing faster than expected, or conversely, if a picture of rebounding growth emerges. Still, the recent selloff could be seen as a healthy part of a bull market that burns off excess froth, said Charles Lemonides, head of hedge fund ValueWorks LLC. "I think the longer-term story is that growth names will carry us through another market high somewhere down the road," he said.