Market uncertainty impends: Fed rate hike and tech earnings boom keep global investors on edge

As financial markets eagerly await the U.S. Federal Reserve’s interest rate decision today, a sense of cautious anticipation grips investors worldwide. Against the backdrop of surging tech earnings, global markets find themselves at a critical juncture.

With the Federal Reserve prepared to raise interest rates, the U.S. dollar slightly hovers back near a two-week high – 0.17% lower to 101.14 after pushing as high as 101.65 overnight on Tuesday for the first time since July 11 – prompting mixed sentiments among traders.

While a quarter-point hike is highly expected, uncertainty looms over the likelihood of additional rate increases later in the year. The dollar index’s rebound from recent lows, powered by signs of a robust U.S. economy despite previous rate hikes, adds to the intrigue.

Market watchers are closely attuned to Fed Chair Jerome Powell’s stance, as any hint of a ‘data-dependent’ approach could sway the dollar’s trajectory. Meanwhile, the euro’s modest recovery on expectations of an ECB rate hike and the evolving scenario surrounding the Bank of Japan’s policy decisions create additional complexities in the currency market.

On the other hand, global stocks are treading cautiously as the Fed’s interest rate decision approaches. European markets witnessed declined, with key indexes experiencing varied performance. S&P 500 futures remained stable, while Nasdaq 100 declined by 0.2%. Dow Jones Industrial Average futures slipped 26 points (0.07% decrease). Mega-cap tech stocks remarkably took center stage in extended trading, with Google-parent Alphabet surging over 6% due to robust cloud revenue growth, surpassing expectations.

On the contrary, Microsoft faced a 3% decline amid concerns of slowing cloud revenue growth. Outside Big Tech, Snap tumbled 19% after-hours due to weak guidance for the current quarter.

Investors worldwide are closely observing the Federal Reserve’s policy path right now, with an expectation of a rate hike nearly unanimous. The outcome of Chair Powell’s ‘triple play,’ including the formal decision and subsequent post-meeting press conference, holds the potential to shape market sentiment.

“Investors will focus on the post meeting press conference and look for any clues about future policy path,” CNBC quoted Bill Northey, senior investment director at U.S. Bank Wealth Management as saying.

In addition, the fate of global markets partially depends on the policy decisions of other major central banks, mainly the ECB and Bank of Japan, as they steer through their own economic challenges.