Fed's Rate Hike Impact: Mixed US Stock Futures, Strong Earnings, and Market Focus on Interest Rate Decisions | Daily Market Analysis

Key events: 

• Eurozone - Deposit Facility Rate (Jul)
• Eurozone - ECB Interest Rate Decision (Jul)
• USA - Core Durable Goods Orders (MoM) (Jun);
• USA - GDP (QoQ) (Q2;
• USA - Initial Jobless Claims;
• Eurozone - ECB Press Conference 
• USA - Pending Home Sales (MoM) (Jun)

On Wednesday evening, US stock futures showed a mixed trend after the Federal Reserve decided to raise interest rates by 25 basis points, which was in line with market expectations. Major averages experienced varied trading as investors also kept a close eye on earnings reports from significant companies.

As of 6:55 pm ET, Dow Jones Futures decreased by 0.2%, S&P 500 Futures remained unchanged, and Nasdaq 100 Futures rose by 0.2%.

During extended trading, Meta Platforms Inc (NASDAQ: META) saw a 7% increase in its stock price after reporting Q2 EPS of $2.98, surpassing the expected $2.91. Additionally, the company's revenues for the quarter were $32 billion, exceeding the anticipated $31.08 billion. For the upcoming Q3 2023, Meta Platforms Inc forecasted revenues in the range of $32 billion to $34.5 billion, higher than the expected $31.2 billion.

However, eBay (NASDAQ: EBAY) faced a decline of 4.8% in its stock value after reporting Q2 EPS of $1.03, slightly higher than the expected $0.99. The company's Q2 revenues were $2.5 billion, slightly below the anticipated $2.51 billion. For the next quarter, eBay projected EPS in the range of $0.96 to $1.01, surpassing the expected $0.92, and revenues in the range of $2.46 billion to $2.52 billion, higher than the expected $2.23 billion.

The Federal Reserve has decided to raise interest rates by 25 basis points, bringing the range to 5.25% to 5.50%. This increase marks the highest rate observed in 22 years, and it was widely expected as the Fed continues its tightening campaign.

In their statement, the Fed expressed optimism about economic growth, acknowledging that economic activity has been expanding at a moderate pace, representing a subtle improvement compared to the previous description of "modest" growth. The focus on consumer prices remains a priority, with the Fed emphasizing that inflation continues to be elevated. Policymakers will closely monitor the risks posed by inflation, similar to their assessment in the previous month.

Following the announcement of the Fed's decision, the US dollar declined across the board. This movement in the dollar led to an increase in gold prices, and investors are now closely watching the $1,973 minor resistance level and $1,978 above.

Gold demonstrated some strength, pushing further into the high-$1,900 an ounce territory after the central bank indicated a data-driven approach to future rate hikes.

Despite this momentum, the yellow metal remained confined within a tight trading range observed over the past two weeks and struggled to surpass the critical $2,000 an-ounce mark, which is seen as a potential signal for further upward movement.

An exception to the overall trend is the Australian dollar, which defied expectations after data revealed that domestic inflation slowed more than anticipated in the second quarter. This decrease in inflation reduced pressure on the Reserve Bank of Australia to implement further policy-tightening measures. The data showed that Australia's consumer price index rose by 6%, a deceleration from the 7% recorded in the first quarter and below the market's expectations of 6.2%. Consequently, the Australian dollar weakened to approximately $0.676.

Apart from the Federal Reserve, market focus this week also revolves around interest rate decisions from the European Central Bank (ECB) and the Bank of Japan (BOJ). The ECB is widely anticipated to raise interest rates by 25 basis points later in the day.

Meanwhile, the BOJ is expected to maintain its ultra-low rates and continue with its dovish policies on Friday. However, some traders are cautiously positioning for a potential hawkish surprise from the Japanese bank, considering that inflation has been trending above its annual target.

The prospect of rising interest rates does not bode well for metal markets, and it is expected to limit significant gains in gold throughout the year.

In Thursday's trading session, market participants will be paying close attention to several key economic indicators, including fresh core durable goods orders, GDP data, pending home sales, and jobless claims. These data points can provide valuable insights into the health and performance of the economy.

Additionally, earnings reports will continue to be in focus, with major companies such as Mastercard Inc (NYSE: MA), McDonald’s Corporation (NYSE: MCD), Intel Corporation (NASDAQ: INTC), and Nestle SA (SIX: NESN) ADR (OTC: NSRGY) set to announce their financial results. These earnings releases can have a significant impact on the respective company's stock prices and may also influence broader market sentiment.

Investors and traders will closely analyze both economic data and earnings reports to gauge the overall market direction and make informed decisions during Thursday's trading session.