The market is trading higher in the early going here on Wednesday due mainly to positive responses to earnings from Alphabet (GOOGL) and Microsoft (MSFT) . Neither company had blowout reports, but market participants were relieved that there was not a major surprise, especially after the ugly news from Walmart (WMT) on Tuesday.
In addition to mild positive responses to Alphabet and Microsoft, there were good reports from Chipotle Mexican Grill (CMG) and Texas Instruments (TXN) , but the market doesn't look quite ready to start chasing the news at this point.
The big event will be the Fed interest rate announcement at 2 p.m. ET, followed by a press conference with Fed Chairman Jerome Powell. It is widely expected that the Fed will raise rates by three-quarters of a percentage point for the second month in a row, but what will be key is the policy statement and any hints about the pace of future hikes.
The Fed has been far more concerned about taming inflation than it has been worried about creating a recession, but now that there is some clear economic slowing in places the issue is whether there will be any hints about a gradual pivot to a less hawkish posture.
Investors are not very optimistic about a market-friendly Fed at this point, but those low expectations mean that even a subtle hint about some shift in policy will likely create a positive market response.
As the Fed news is digested, there will be a slew of earnings reports as well. Companies such as Meta Platforms (META) and Ford Motor (F) report tonight, and Apple (AAPL) is on deck for Thursday.
Overall the news flow out there is not very positive, but expectations are low and that is helping to create a positive reaction. If we had this sort of news in a different market environment there would be substantial selling pressure, but this market has discounted quite a bit of bad news already so mediocre news is all it takes to create a positive response.
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
Read more here:
The Power of Low Expectations Is on Display in Reaction to Tech Giants' Results - RealMoney
