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Market Update

Stocks Edge Higher But Suspended in Pre-Fed Uncertainty

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July 29, 2015

The stock market is trying for back-to-back winning sessions after logging a five-session losing streak. China’s battered Shanghai Composite staged a late-day recovery to end up 3.4% but the sudden move left most global stock analysts suspecting that government buying came in late, meaning that investor sentiment there remains downbeat.

Earnings news was mixed, doing little to rally or sink the broader market. Closely watched names including Twitter (TWTR) disappointed with key metrics. Watch for tepid early trading as today wraps a two-day policy session for the Federal Reserve, with a statement due at 2 p.m. Eastern (there’s no news conference this time around). 

SPX-snaps-slide

FIGURE 1: LOSING STREAK SNAPPED.

The S&P 500 (SPX) bounced on Tuesday and signals tepid early gains Wednesday. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Telling Fed Statement? Investors are watching closely for clues on the liftoff of the Fed’s first interest rate tightening campaign since 2006. Currency markets have priced in a September rate hike. Chair Janet Yellen has previously indicated that a rate increase is possible as early as September. But some industry expectations for that hike have cooled in recent days partly because of stock market turmoil in China and the rout in commodities prices. Surely, the Fed will have to mention these factors today even as they likely point to signs of U.S. economic expansion. Importantly, telling employment, inflation, housing, and other reports will hit before the September meeting. Rates are headed higher eventually, but the timing remains elusive for Wall Street and that spells volatility for stocks.

Social Media User Slump? Twitter (TWTR) tumbled in early action Wednesday as fussy investors weren’t happy with a 61% jump in ad-fueled revenue especially when user growth numbers fizzled. Investors are watching for TWTR to reach the scale of rival Facebook (FB), which reports earnings after the close today. The company said 316 million users now sign in to the service at least once a month, up 2.6% from the prior quarter, including those who get on through messaging platforms. Wall Street was not impressed. TWTR posted revenue of $502.4 million compared with $312.2 million a year earlier. But it marked Twitter's weakest quarterly revenue growth as a public company and renewed attention on efforts to boost spending on its direct-response ads. Twitter also forecast revenue for the current quarter of $545 million to $560 million, while analysts polled by Thomson Reuters expect $556 million. Yelp (YELP) tanked in early trading action after it swung to a Q2 loss and slashed its full-year sales outlook.

Earnings Gainers. It wasn’t all downbeat news on the earnings front. Citrix Systems (CTXS) led S&P 500 winners after the software company topped Street expectations with its top and bottom lines. Gilead Sciences (GILD) was the second-biggest SPX gainer after the biotech late Tuesday beat with adjusted quarterly profit and revenue. Altria (MO) beat, too.

Good trading,
JJ
@TDAJJKinahan

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