Investors are highly attentive to Wednesday's Federal Reserve decision, which will feature Chair Jerome Powell's final press conference. Simultaneously, equity traders are buying technology stocks on dips as markets brace for earnings reports from four major tech companies. These results will serve as a critical test to determine whether this month's rally has further room to run.
As of writing, Dow Jones futures edged up 0.02%, S&P 500 futures gained 0.07%, and Nasdaq futures advanced 0.34%.
In Europe, the Stoxx 600 index declined 0.4% as investors digested a mixed batch of corporate earnings. UBS Group rose 5% after its trading business delivered a strong surprise profit. Deutsche Bank fell 3.2% due to hits from its commercial real estate exposure. Adidas climbed 7.3% following optimistic sales figures that exceeded expectations.
S&P 500 futures showed little change. Nasdaq 100 futures rebounded 0.3% after the index dropped more than 1% in the previous session. Alphabet, Microsoft, Amazon.com, and Meta Platforms are set to report results after the market closes. These four firms have been key drivers behind the U.S. stock market's four-week rebound to record highs. Technology sectors also outperformed in European and Asian markets.
Ahead of earnings season, market sentiment has cooled slightly. Recent reports that OpenAI failed to meet internal weekly active user and revenue targets have reignited concerns about the AI spending spree among tech giants.
Kyle Rodda, Senior Financial Markets Analyst at Capital.com, stated: "After such a sharp rally in U.S. tech stocks, questions about returns and valuations are resurfacing. Tech shares have been the primary force behind Wall Street's recovery to record levels." He added that reports related to OpenAI may also provide investors with a "convenient excuse" to sell some outperforming stocks and lock in profits.
In pre-market trading, Amazon.com and Meta Platforms were flat, while Alphabet and Microsoft each declined 0.2%.
Shaniel Ramjee, Co-Head of Multi-Asset Investments at Pictet Asset Management, noted that investors will focus on the capital expenditure plans of hyperscale cloud providers, which operate massive data centers and AI infrastructure.
He commented: "What we saw from OpenAI yesterday raised some questions about its targets, and these doubts could impact certain spending. Today, the market will scrutinize statements from hyperscale cloud providers—not only how much they plan to spend, but also where the funding comes from and whether such expenditures are sustainable."
Strong results from memory chip maker Seagate Technology Holdings Plc and analog chipmaker NXP Semiconductors NV fueled Wednesday's market rebound. Both companies surged 17% in pre-market trading, lifting peers in the sector. Most of the "Magnificent Seven" stocks weakened.
Russ Mould, Investment Director at AJ Bell, remarked: "U.S. companies excel at quarterly earnings. They know how to lower expectations and then exceed them. The absence of bad news elsewhere, the strong competitive positions of the 'Magnificent Seven,' and their robust earnings outlook may be encouraging bulls."
As hyperscale cloud providers report earnings, the AI trade has propelled equity markets higher, ignoring the impact of Middle East conflicts. Key questions remain whether capital expenditure is sufficient to support their supplier ecosystems and whether revenue growth justifies these investments.
Roger Lee, Head of Equity Strategy at Cavendish, said: "Buying the dip has been a profitable strategy for quite some time. Any new information about monetizing AI capital investments will be crucial, as will the question of how much incremental capital expenditure the AI arms race still requires."
Brent crude rose above $114 per barrel after the U.S. signaled it would maintain a maritime blockade on Iranian ports, keeping the Strait of Hormuz impassable. The Iran conflict has persisted for two months with little sign of resolution. U.S. President Donald Trump expressed dissatisfaction with Iran's latest proposal and has instructed aides to prepare for a long-term port blockade.
Analysts indicated that the United Arab Emirates' decision to leave OPEC is unlikely to significantly impact oil prices in the short term, though it may weaken the producer group. Russia suggested the move could eventually increase production and lower prices. Attacks on Gulf states have decreased since the April 8 ceasefire.
Investors are also awaiting the outcome of the Federal Reserve's April meeting. Policymakers are expected to hold interest rates steady while assessing the economic impact of the Iran conflict. Pictet's Ramjee noted: "Inflation will be closely watched as rising energy prices take effect, and markets will observe how willing the Fed is to look past this energy price surge."
Republican Senator Thom Tillis has dropped his opposition to Kevin Warsh's Senate confirmation. President Trump nominated Warsh to succeed Powell after the Justice Department concluded its investigation into Powell, which Tillis had argued threatened Fed independence.
The dollar held steady. Despite pulling back from late-March highs this month, the currency has functioned as a safe-haven asset during the conflict.
Meanwhile, U.S. Treasuries dipped slightly ahead of the Fed's latest rate announcement. The 10-year Treasury yield rose 2 basis points to 4.36%. This meeting is likely to be Jerome Powell's last as Fed chair.
Francesco Pesole, FX Strategist at ING, wrote: "While the market may view Powell's signals cautiously since this should be his final press conference, the risk is that his tone could lean hawkish."
European bonds fell more sharply as traders increased bets on ECB and Bank of England rate hikes in 2026.
Although the Fed is expected to keep rates unchanged for the third consecutive meeting, investors will seek clues on how long policymakers are willing to remain patient. Soaring energy prices raise the possibility of stronger inflation and slower growth, leading markets to watch for any adjustments to the language in March's statement.
Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank, wrote: "The base case is that the Fed will wait until June to make substantive guidance changes, but the risk is that communication could skew hawkish."
Gold fell 0.8% to around $4,560, after hitting its lowest level since April 2 in the previous session.
UBS CEO Sergio Ermotti warned that financial markets risk being overly optimistic about the Middle East conflict outlook. Despite no visible sustainable resolution, stock markets continue to rally, with U.S. indices like the S&P 500 and Nasdaq Composite hitting new highs on Monday.
Ermotti stated that investors have experienced multiple V-shaped recoveries in recent years, where markets quickly normalize. He said: "Markets are quite optimistic, hoping the final outcome will indeed be positive." But he added that governments now have limited room for stimulus to boost growth, emphasizing diversification as a hedge against market reversals.
Goldman Sachs issued a stock market pullback alert. John Flood, Partner and Head of Americas Equity Execution Services at Goldman Sachs, noted that as equity positioning grows increasingly crowded globally and powerful institutional forces like CTAs prepare to shift from buying to selling, investors should brace for a near-term correction.
Ahead of major tech earnings this week, Goldman strategists warned that waning CTA buying, pension rebalancing sales, hedge fund deleveraging, and deteriorating market breadth could collectively trigger a short-term pullback.
However, Flood reiterated that the long-term bull market outlook remains intact, expecting the S&P 500 to be "significantly higher" by year-end, with any dip representing a buying opportunity.
HSBC raised its rating on U.S. stocks to "overweight," citing signs of easing Middle East geopolitical risks and a renewed focus on AI-driven earnings growth. Senior Strategist Alastair Pinder upgraded the rating from "neutral," noting that AI-driven profit expansion momentum has "clearly turned positive."
Pinder indicated that S&P 500 profits for the three months through March are projected to grow 14% year-over-year, marking the fastest expansion since 2024.
**Key Stocks** Storage chip concept stocks surged collectively: Silicon Motion jumped over 22%, Seagate Technology soared 17%, Western Digital gained nearly 10%, SanDisk rose over 6%, and Micron Technology advanced nearly 4%.
Starbucks rose over 5% pre-market on better-than-expected quarterly revenue.
Visa climbed 5% pre-market after a strong Q2 earnings beat, raised full-year guidance, and a large share buyback announcement.
UBS gained 4.8% pre-market as Q1 net profit surged 80% year-over-year, exceeding expectations, with plans for further stock repurchases.
Haleon fell over 2% pre-market due to Q1 organic sales growth missing estimates.
TotalEnergies continued rising 1% pre-market after Q1 adjusted net profit beat expectations.
NXP Semiconductors surged over 15% pre-market as improved demand drove better-than-expected Q1 results.
Bloom Energy jumped over 14% pre-market after Q1 revenue doubled, turning a profit, and significantly raising full-year guidance.
Nio advanced over 4% pre-market as its Ledao L8 model began pre-sales.
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