Global Stock Index Dips on Earnings and Fed Jitters

By Sinéad Carew and Chris Prentice

NEW YORK – MSCI’s global equities index experienced a decline on Tuesday as investors showed apprehension ahead of significant corporate earnings announcements and central bank meetings, while concerns over the global economy contributed to a drop in oil prices.

In the U.S., Treasury yields decreased amid fluctuating trading conditions as the market anticipated the outcomes of the Federal Reserve’s meeting, set to conclude on Wednesday. The Fed is widely expected to maintain interest rates but may indicate a potential rate cut in September.

Market participants are keenly awaiting earnings reports from key companies, including Microsoft and chipmaker AMD later in the day, as well as reports from Apple and Amazon scheduled for later in the week.

"Markets are closely monitoring earnings and the Fed’s statements on Wednesday," remarked John Praveen, managing director at Paleo Leon. He also noted that some investors were concerned about rising tensions in the Middle East following an Israeli airstrike targeting a senior Hezbollah commander in Beirut, which the Israeli military described as retaliation for a cross-border attack that resulted in the deaths of 12 children and teenagers.

On Wall Street, the Dow Jones Industrial Average rose 203.73 points, or 0.50%, to 40,743.66. The S&P 500 fell 27.12 points, or 0.50%, to 5,436.42, while the Nasdaq Composite dropped 222.78 points, or 1.28%, to 17,147.42.

MSCI’s global stock index declined by 2.40 points, or 0.30%, to 801.95, although European markets had seen a modest uptick earlier, closing up 0.45%.

In the currency markets, the Japanese yen strengthened as reports indicated the Bank of Japan might consider raising interest rates to 0.25% when it concludes its two-day meeting on Wednesday. The U.S. dollar index, which measures the dollar against a basket of currencies including the yen and euro, decreased by 0.03% to 104.55. The euro declined by 0.09% to $1.0809, while the dollar weakened 0.56% against the yen to 153.14. Sterling dropped 0.22% to $1.2831.

Traders are estimating an almost equal chance of a rate cut from the Bank of England at its policy meeting on Thursday.

In terms of U.S. Treasuries, the yield on the benchmark 10-year notes fell by 3.5 basis points to 4.143%, down from 4.178% late on Monday. The yield on 30-year bonds decreased by 3.2 basis points to 4.4013%, from 4.433% late the previous day. The 2-year yield, which typically aligns with interest rate expectations, dropped by 2.6 basis points to 4.3606%.

"The prevailing expectation is that the Fed will recognize softness in inflation and the labor market and may hint at possible policy adjustments in September," stated Thomas Urano, co-chief investment officer and managing director at Sage Advisory based in Austin, Texas. "If they fail to do so, the market might feel short-term disappointment. Ultimately, we expect the economic data to reflect a normalized labor market, if not a weaker one, along with inflation stabilizing within the Fed’s target range."

In energy markets, oil prices fell by more than 1% to a seven-week low, as concerns grew over weakening demand from China. Additionally, OPEC+ appears likely to adhere to plans for increased supplies. West Texas Intermediate crude settled down 1.4% at $74.73 per barrel, while Brent crude ended its session at $78.63 per barrel, also down 1.4%.

In commodities, gold prices rose as investors anticipated that the Fed might provide insights about potential interest rate reductions in September. Gold increased by 1.04%, reaching $2,408.32 an ounce, while silver gained 1.15% to $2,405.20 an ounce.