Market Fireworks Start Wednesday and There's No Shortage of Catalysts
Will a dovish Fed help extend the market uptrend? Will key earnings see a 'sell the news’ reaction? Here's my game plan as it all unfolds.
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The market stumbled on Tuesday as investors prepared for an onslaught of market-moving news events.
First up is the Fed interest rate decision at 2 p.m. ET on Wednesday. That is followed by earnings from Microsoft MSFT, Meta META, and Qualcomm QCOM after the market close.
On Thursday morning, there is the PCE inflation report and then earnings from Apple AAPL and Amazon AMZN. On Friday morning, the July employment report will be released.
The most important of these events is likely to be the Fed. The Trump administration has been increasingly aggressive in pushing the Fed to cut rates as soon as possible, but there is little chance that it will announce a cut at this meeting. However, it is expected that there will be dissent from at least two members, which will be the first time in more than 25 years that there has been this level of public disagreement.
The key question for investors will be whether Fed Chair Powell gives a clear signal that a rate cut is coming at the next meeting in September. If there is an obvious hint of that likelihood, there is very likely to be a positive market reaction. However, there is concern that Powell will reiterate his position that more data is needed before the Fed can be confident that it is time to cut rates.
Investors will be hanging on every word from Powell at his press conference on Wednesday afternoon. There is a tendency for the market to put a positive spin on the remarks, so there is substantial risk to the bears that are hoping for continued caution from the Fed.
Shortly after the Fed, major earnings will start to hit, and there will be the risk of a "sell the news" reaction if there aren’t clear beats and increased guidance. Four of the Magnificent Seven will report in the next two days, and then the very important July jobs news will be released Friday morning.
There is no shortage of catalysts, and they are all hitting with the indexes extended and showing some signs of stress as momentum cooled off on Tuesday. The action Tuesday was the first weakness in a couple of weeks and puts the indexes in a poor position for renewed momentum unless there is some very good and very surprising positive news.
My game plan isn’t to bet on the outcome of these events but to focus on trading the reaction as the news is digested. I have a good shopping list and will be watching for charts and entry points to develop after the fireworks are over.
At the time of publication, Rev Shark was long META.
