News of the day for July 31, 2024

The Federal Reserve is widely expected to keep its key interest rate steady at 23-year highs as it concludes its two-day meeting, although all eyes will be on whether Fed chair Jerome Powell signals a September rate cut; Meta Platforms ( META ) is expected to report higher second-quarter results after the closing bell, with investors focused on its ad revenue strength and artificial intelligence (AI) spending and plans; Arm Holdings ( ARM ) is surging in premarket trading as investors watch for updates on its royalty revenue and an AI chip it is developing; shares of Dutch semiconductor-gear maker ASML Holding ( ASML ) are soaring in premarket trading as the U.S. reportedly prepares to exempt chip-equipment manufacturers from the Netherlands, Japan, and South Korea from exports curbs to China; and Microsoft ( MSFT ) is falling after its cloud growth slowed and missed Wall Street forecasts. U.S. stock futures are rising ahead of today’s tech earnings and hopes for a clear signal of a rate cut. Meanwhile, the Bank of Japan, which ended its negative interest rate policy in March, raised its benchmark rate to the highest level since 2008. Here's what investors need to know today.

1. Fed Expected to Stay Pat on Rates, Powell to Signal Cuts Timeline

The Federal Reserve is widely expected to maintain its influential interest rate at its current 23-year-high level when officials make policy decisions on Wednesday, but investors' focus will be on chair Jerome Powell's signals on when cuts may start. Market participants widely expect the central bank to start cutting the fed funds rate in September as the Fed gains confidence that inflation is under control—its long-stated condition to kick off easing. Price pressures have been moderating and the job market is continuing to soften. The Fed held the rate at near zero during the pandemic to stimulate the economy with easy money, then ratcheted it up from March 2022 to slow the economy and stifle inflation, and has held it since July at the highest levels since 2001.

2. Meta Expected to Post Rising Q2 Results

Meta Platforms ( META ) is expected to report higher second-quarter results after the closing bell on Wednesday, with investors focused on its spending on artificial intelligence (AI) and the strength of its advertising revenue after it rolled out new AI tools . The Facebook and Instagram parent is expected to report a 20% year-over-year gain in revenue to $38.37 billion, and earnings per share (EPS ) of $4.71, up from $2.98. Analysts are forecasting a surge in Q2 ad revenue on an improved ad environment, the adoption of Instagram Reels, and new products for advertisers. Its shares are little changed in premarket trading.

3. Arm Gains Ahead of Q1 Results, May Disclose AI Chip Details

American depositary receipts (ADRs ) of Arm Holdings ( ARM ) are surging 4% in premarket trading as it gears up to report fiscal 2025 first-quarter earnings after the bell, with investors likely watching for updates on its royalty revenue and reported AI chip development. The British chip designer is projected to report a 34% year-over-year growth in revenue to $909.3 million and EPS of 16 cents, up from 10 cents. Arm could also provide investors with insights about an AI chip it reportedly has in development. The company could be positioned to gain as big tech companies like Microsoft, Meta, Alphabet ( GOOGL ), and Amazon ( AMZN ) invest in AI , and build out data centers to run AI-related workloads.

4. ASML Jumps as US Set to Exempt Allies From China Chip-Equipment Export Curbs

Shares of Dutch semiconductor-gear maker ASML Holding ( ASML ) are soaring 7% in premarket trading on a report that the U.S. is on track to exclude chip-equipment makers in the Netherlands, Japan, and South Korea from its latest set of trade curbs aimed at reining in China's tech advance. According to Reuters , shipments from allies that export key chipmaking equipment won’t be included from an expansion of the Foreign Direct Product Rule next month by the Biden administration, thus limiting that new rule. The expansion will prevent around half a dozen Chinese fabs from getting exports from many countries, the report said. Places whose exports would be affected would include Israel, Taiwan, Singapore, and Malaysia. In Japan, Tokyo Electron shares closed up 7%.

5. Microsoft Slips as Cloud Revenue Misses

Meta's Magnificent 7 peer Microsoft ( MSFT ) is falling almost 3% in premarket trading after its cloud growth slowed and missed Wall Street forecasts even as overall quarterly results were a beat. The earnings-driven drop comes after Microsoft shares have slumped from their record close set on July 5, pressured by a broad selloff in technology stocks and a global IT outage earlier this month caused by an erroneous software update by cybersecurity firm CrowdStrike ( CRWD ) that triggered widespread disruptions . Microsoft Chief Executive Officer (CEO ) Satya Nadella said capital expenditures —a key focus of investors for tech earnings—are being guided by " demand signals ," including the growth in Azure AI, and that the company's spending would change if demand shifts.

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