Investing.com - Here are the top five things you need to know in financial markets on Friday, July 26:
1. Slowdown expected for American economy
The Bureau of Economic Analysis will report its preliminary reading on second-quarter GDP at 8:30 AM ET (12:30 GMT) Friday, with annualized growth forecast to slow to 1.8%, the weakest reading in more than two years, from 3.1% in the first three months of the year.
The slowdown - which comes amid a 10-year economic expansion, the longest in history - is partly a reflection of inventory management around the introduction of new tariffs on Chinese imports, the sharpest illustration of the trade conflict that has hit global growth. That backdrop has fed expectations that the Federal Reserve will step in next week with a quarter-point cut to interest rates.
A worse-than-expected number could drive U.S. stocks higher as markets would interpret the reading as ammunition for the Fed to ease policy more aggressively.
A much stronger-than-expected rise in durable goods orders released on Thursday diminished the odds for a larger 50 basis-point cut on July 31 to just above 20%. Following July’s expected reduction, Fed funds futures have priced in additional 25 basis point cuts in both September and December.
Investing.com - Here are the top five things you need to know in financial markets on Friday, July 26: Investing.com - Here are the top five things you need to know in financial markets on Friday, July 26: Investing.com - Here are the top five things you need to know in financial markets on Friday, July 26
2. Alphabet, Intel wow while Amazon disappoints; Starbucks jumps
Quarterly earnings released after Thursday's market close will be priced in, with Google (NASDAQ:GOOGL) parent Alphabet (NASDAQ:GOOG) and Intel (NASDAQ:INTC) set to boost techs, while Amazon (NASDAQ:AMZN) missed the mark.
Alphabet's shares soared more than 8% in premarket trade following a quarterly report that beat on the top and bottom lines and included a $25 billion buyback. The tech giant also eased investor concerns over increased regulatory scrutiny, saying that it was nothing it hadn’t seen before.
Intel (NASDAQ:INTC) shares jumped 5% after it reported solid numbers and an increased revenue forecast, both of which bode well for other chipmakers.
Amazon.com (NASDAQ:AMZN) was the exception to the positive news, with shares off 1.5%, as profit missed consensus and the company warned on third-quarter operating income.
Outside of tech, Starbucks (NASDAQ:SBUX) delivered as comparable sales beat estimates and the company raised its annual profit forecast. Shares soared more than 6%.
3. Twitter, McDonald’s to take up earnings baton
Earnings season has yet to reach the halfway mark with only 42% of S&P 500 firms having so far released quarterly numbers as of Thursday’s close. 76% of those companies have beaten profit expectations with average growth of 5.5% while 63% have topped sales estimates with 4.7% growth, according to The Earnings Scout.
Twitter (NYSE:TWTR) will pick up the earnings baton for tech companies as it reports ahead of the open.
Average monetizable daily active users (mDAU) will be one of the closely-watched metrics after the company reported an 11% rise to 134 million in the first quarter.
Markets will also be on the alert for any reflection of rising regulatory risk in its guidance.
McDonald’s (NYSE:MCD) will be in the spotlight as the only Dow company to report ahead of the bell, with market focus centered on same-store sales.
4. Apple confirms $1 billion purchase of Intel’s modem business
Apple (NASDAQ:AAPL) confirmed reports that it was on its way to becoming self-reliant in smartphone chips as it picked up the majority of Intel’s modem business in a deal valued at $1 billion.
Modem chips connect devices like the iPhone to wireless data networks. Apple (NASDAQ:AAPL) has always relied on outside suppliers for the part.
The deal with Intel (NASDAQ:INTC) will bolster Apple's goal to make its own modem chip, closing a gap with two of its biggest global rivals - Samsung Electronics (KS:005930) and Huawei - that already source those components internally.
5. U.S. futures receive boost from earnings ahead of GDP
Mostly upbeat earnings reports were sufficient to return risk appetite to U.S. markets with tech shares leading gains. Wall Street took a dip on Thursday, with blame attributed to the better-than-forecast durable goods orders that dented arguments for aggressive Fed action.
The GDP data will likely be the final piece of the puzzle to fit into speculation over just how dovish the Fed will be next week, and focus may well fall on U.S. President Donald Trump’s Twitter account, given the pressure he has already exerted on the central bank through that channel.
Trump has criticised the Fed for raising rates too fast last year and not recognizing the need for faster easing now, arguing that economic growth would be much higher and the “very misguided” central bank should “move now”.
Trump’s last tweet on Thursday announced the expected passage of the budget deal.
-- Reuters contributed to this report.
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2019-07-26 09:56:15Z
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