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Powell speech, Apple results, OECD growth - what's moving markets

May 2, 2024 4:40 AM

Investing.com -- Fed chief Jerome Powell appears to have calmed nerves on Wall Street, with futures looking positive. Apple is set to report results after the close, and a drop in revenue is expected, while the OECD has lifted its forecast for global growth this year.


1. Powell eases rate hike fears


Federal Reserve Chair Jerome Powell’s comments at the conclusion of the central bank’s latest policy meeting soothed nerves, with the central bank maintaining its easing basis.


The Fed left interest rates on hold, as widely expected, and Powell acknowledged that fighting inflation was taking longer than expected.


However, he largely ruled out interest rate hikes this year, which could be seen as something of a relief given recent stronger-than-expected inflation data.


"There are paths to not cutting and there are paths to cutting. It's really going to depend on the data," he said, suggesting that the options available to the central bank going forward don’t include a rate hike.


He emphasised the need to be data-dependent, and the first key data point arrives on Friday, with the closely watched U.S. employment report.


Nonfarm payrolls are expected to have risen 243,000 in April, a drop from just over 300,000 the prior month, but still indicative of a healthy labor market.


“The most notable aspect of the press conference was Powell’s strong pushback against the possibility of rate hikes,” said analysts at Goldman Sachs.


“We continue to expect two rate cuts this year in July and November, though even moderate upside surprises on upcoming inflation prints could delay cuts further.”


2. Apple faces sharp revenue drop


Apple (NASDAQ: AAPL) will be the next of the mega-cap tech stocks to release results, with the iPhone maker due after Thursday’s close.


The tech giant is expected to report its biggest quarterly revenue decline in more than a year, with analysts looking for total revenue to have dropped 5% in its fiscal second quarter ended in March - which would be Apple's biggest revenue decline since the December 2022 quarter.


iPhone sales, which account for about half of Apple's revenue, are seen falling an expected 10.4% in the first three months of 2024, according to LSEG - the steepest drop in more than three years - as the company faces strong competition, especially in China.


The market will also be looking for details of Apple's plan to add generative AI to its iPhones, given the company is in talks with OpenAI and Alphabet-owned Google (NASDAQ: GOOGL) to add these features.


Analysts believe such an AI integration could drive demand for the next iPhone series, expected to be announced in the fall.


3. Futures rise ahead of more corporate earnings


U.S. stock futures rose Thursday as investors digest the latest Fed meeting, ahead of the release of more corporate earnings and important economic data.


By 04:15 ET (08:15 GMT), the Dow futures contract was 170 points, or 0.5%, higher, S&P 500 futures climbed 35 points, or 0.7%, and Nasdaq 100 futures rose by 160 points, or 0.9%.


Fed chair Jerome Powell’s ruling out of rate hikes has boosted sentiment after the previous month saw the benchmark Dow Jones Industrial Average post its worst monthly performance since September 2022.


There is more economic data to study Thursday, including weekly jobless claims and first-quarter worker productivity and unit labor costs ahead of Friday’s closely watched April jobs report.


The earnings season continues as well, with reports due from the likes of Moderna (NASDAQ: MRNA) and Peloton (NASDAQ: PTON) before the open, ahead of late releases from Apple [see above], Amgen (NASDAQ: AMGN), Coinbase (NASDAQ: COIN) and DraftKings (NASDAQ: DKNG).


Chipmaker Qualcomm (NASDAQ: QCOM) impressed with its earnings after the close Wednesday, while food delivery company DoorDash (NASDAQ: DASH) reported a wider loss than expected.


4. US to boost global growth this year - OECD


The Organisation for Economic Cooperation and Development has lifted its forecast for global growth, driven largely by resilient U.S. activity.


The OECD now sees the global economy growing by 3.1% in 2024, the same growth rate as last year, before picking up marginally to 3.2% next year, upgrading forecasts dating from February for growth of 2.9% this year and 3% in 2025.


However, the group indicated that speed of recoveries diverged widely in the different regions, with sluggishness in Europe and Japan offset by the United States, whose growth forecast was hiked to 2.6% this year from a previous estimate of 2.1%.


Boosted by fiscal stimulus, China's economy was also expected to grow faster than expected with its growth now forecast at 4.9% in 2024 and 4.5% in 2025, up from 4.7% and 4.2% respectively in February.


5. Crude boosted by weaker dollar


Crude prices edged higher Thursday, rebounding after three losing days, helped by a weaker dollar in the wake of the Fed meeting.


By 04:15 ET, the U.S. crude futures traded 0.9% higher at $79.73 a barrel, while the Brent contract climbed 1% to $84.25 per barrel.


Oil prices were buoyed chiefly by a drop in the dollar after Fed boss Jerome Powell all but ruled out an interest rate hike this year [see above] at the conclusion of the latest central bank meeting.


Crude, like many commodities, is priced in dollars, and a weaker dollar boosts demand by making oil cheaper for international buyers.


That said, gains are limited after crude fell to a seven-week low on Wednesday, pressured by an unexpected increase in U.S. crude inventories and signs of an impending Israel-Hamas ceasefire that would ease Middle East supply concerns.


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