A decent run of corporate results including a surprise earnings beat from Twitter (NYSE:TWTR) afterhours is improving sentiment in US markets before the conclusion of the latest Federal Reserve policy meeting on Wednesday.
General consensus is that there will be no rate hike in July but the statement will imply it could happen at any of the next meetings without giving any clues as to which one. Fed Chair Janet Yellen took a more hawkish bias at her Humphrey Hawkins testimony, choosing to downplay the multiple reasons the Fed could hold off on a hike. A similar tone is likely to be struck in the Fed’s July statement.
The US Dollar Index has been plagued in the last week by disappointing economic data relative to that seen in Europe so the market will be looking for any hawkish bias from the Fed as an opportunity to buy dollars on the dip.
Shares of Twitter have been up as much as 10% and even negative afterhours following a mixed earnings report that saw an unexpected jump on the top and bottom line for the second quarter alongside sluggish user growth. Twitter is clearly scaling up the monetisation of its platform which is making it more profitable, but that can only take the company so far with 316m active users, up just 15% in the last year.
Social Networking rival Facebook (NASDAQ:FB) reports after Wednesday’s close. Facebook had 1.44bn active users as of the first quarter of 2015, up 13% on the year. Facebook’s peak user growth is probably behind it but with over a billion users and acquisitions such as WhatsApp and Instagram yet to be monetised, there’s plenty of room for growth. The issue is not Facebook’s growth potential but rather how expensive and how long will it take to get Facebook fully utilising its user base?
Earnings are also expected from MasterCard, Whole Foods, Humana, MetLife, Western Digital, Wynn Resorts and Marriott on Wednesday.
Futures suggest the:
S&P 500 will open 5 points higher at 2,098 with the
Dow Jones expected to open 44 points higher at 17,674 and the
Nasdaq 100 15 points higher at 4,575
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