Investors Turn Cautious Ahead of Fed's Rate Decisions

Barry Adams
30 Apr, 2024
New York City

Stocks on Wall lacked direction in early trading as investors reviewed the latest batch of earnings and awaited the Fed's monetary policy announcement on Wednesday. 

Mc Donald's reported weaker-than-expected same-store sales growth, Coca-Cola lifted its full-year organic revenue outlook, Eli Lilly reported a surge in quarterly sales, and NXP Semiconductors announced better-than-expected adjusted quarterly earnings. 

Investors are widely anticipating that the Federal Reserve will hold steady interest rates after the two-day policy meeting on Wednesday. 

Despite the eleven rate hikes between March 2022 and July 2023, inflation is still above the Fed's target range of 2%, driven by nearly 4% inflation in the service sector. 

Major indexes are set to close the month with losses after rallying for six months in a row and lowering rate expectations. 

At the beginning of 2024, investors were hoping for as many as six rate cuts, and those expectations have been sharply lowered to just one after inflation stayed elevated. 

The S&P 500 index and the Nasdaq Composite are likely to close down April with a loss of 2% and trim the year-to-date gains to 8%. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,135.19, and the Nasdaq Composite surged 0.3% to 15,990,38. 

The yield on 2-year Treasury notes edged higher to 5.02%, 10-year Treasury notes inched lower to 4.66%, and 30-year Treasury bonds edged lower to 4.78%.

WTI crude oil decreased $0.02 to $82.69 a barrel, and natural gas prices increased 1 cent to $2.04 a thermal unit.

Gold decreased by $27.02 to $2,306.78 an ounce, and silver fell 6 cents to $26.41. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.95.

 

U.S. Stock Movers

McDonald's decreased 0.8% to $271.36 after the fast food company reported mixed quarterly results and sales took a hit from the boycott in the Middle East. 

Revenue in the first quarter increased 5% to $6.2 billion from $5.9 billion, net income rose 7% to $1.9 billion from $1.8 billion, and diluted earnings per share advanced to $2.66 from $2.45. 

Global comparable same-store sales slowed sharply in the first quarter to 1.9% from 12.6%, and U.S. sales slowed to 2.5% from 12.6% in the corresponding period a year ago. 

NXP Semiconductors gained 4.2% to $257.50 after the advanced chipmaker reported better-than-expected quarterly results. 

Revenue in the first quarter increased by 0.2% to $3.13 billion, net income increased to $639 million from $615 million, and diluted earnings per share advanced to $2.47 from $2.35 a year ago. 

Coca-Cola decreased 0.1% to $62.0 despite the beverage company reporting better-than-expected quarterly results and raising its annual outlook. 

Consolidated net operating revenue in the first quarter increased 3% to $11.3 billion from $10.98 billion, net income rose 2% to $3.18 billion from $3.11 billion, and diluted earnings per share advanced to 74 cents from 72 cents a year ago. 

Eli Lilly & Co. increased 6.9% to $788.0 after the drugmaker reported better-than-expected quarterly results and raised its full-year outlook. 

Revenue in the first quarter soared 26% to $8.7 billion from $6.9 billion, net income advanced 67% to $2.2 billion from $1.3 billion, and diluted earnings per share rose 58% to $2.58 from $1.62 a year ago. 

Sales growth in the quarter was driven by increases of 16% in volume and 10% due to higher realized prices. 

The volume increase was primarily driven by growth from Mounjaro, Zepbound, Verzenio, and Jardiance, partially offset by declines in Trulicity. 

The company continues to expand manufacturing capacity, with the most significant production increases in 2024 expected in the second half of the year. 

New Products revenue grew by $1.79 billion to $2.39 billion in Q1 2024, led by its blockbuster diabetes drug Mounjaro and weight loss treatment Zepbound.