Here are the top five things you need to know in financial markets on Wednesday, August 1:
1. Markets Await Fed Policy Statement
The Federal Reserve is expected to keep interest rates unchanged at the conclusion of its policy meeting this afternoon, but solid economic growth combined with rising inflation are likely to keep it on track for another two hikes this year even as President Donald Trump has ramped up criticism of its push to raise rates.
The Fed will announce its decision at 2PM ET and release its accompanying rate statement at the same time.
No press conference is scheduled and only minor changes are anticipated compared with the Fed's June policy statement, which emphasized accelerating economic growth, strong business investment and rising inflation.
The U.S. central bank so far this year has increased borrowing costs in March and June, and investors see additional moves in September and December.
Besides the Fed, the economic calendar will also be busy on Wednesday, as investors get a look back at July.
ADP will release its July report on private payroll growth at 8:15AM ET. The July report on auto sales and the July reports on manufacturing activity from the Institute of Supply Management and Markit Economics also will be released.
Investors will pay particular attention to the surveys for any impact tariffs are having on the sector.
There is also weekly oil supply data from the U.S. Energy Information Administration (EIA) scheduled for this morning.
2. U.S.-China Trade War Back In Focus
Conflicting signs over the state of U.S.-China trade relations pulled markets in opposite directions. A Bloomberg report on Tuesday said that the United States and China were seeking to resume trade talks to defuse a battle over import tariffs.
However, later reports that the Trump administration plans to propose tariffs of 25%, instead of the initially proposed 10%, on $200 billion of imported Chinese goods injected uncertainty back into financial markets.
A source familiar with the plan said the announcement could come as early as Wednesday.
While the tariffs would not be imposed until after a period of public comment, raising the proposed level to 25% could escalate the trade dispute between the world's two biggest economies.
China's Foreign Ministry warned earlier that it will retaliate if the U.S. takes further steps hindering trade.
Investors fear an escalating trade war between the world's two biggest economies could hit global growth and damage sentiment.
3. Apple In Touching Distance Of $1 Trillion After Earnings Beat
Apple (NASDAQ:AAPL) shares rose 3.7% in pre-market trade to $197.34, a record high, putting its market capitalization at $954 billion.
The stock would need to hit $206.49 for Apple to become the first publicly traded U.S. company to cross the $1 trillion threshold, based on Apple's share count at the end of the quarter. Apple may have reduced its share count since then.
The tech giant reported strong results for its fiscal third quarter after the closing bell on Tuesday, with subscriptions from App Store, Apple Music and iCloud services bolstering business.
While Apple sold 41.3 million iPhones in the fiscal third quarter, half a million less than expected, the average iPhone selling price topped expectation by $30, hitting $724, according to FactSet.
The world's most valuable technology company also forecast revenue above expectations for the fall, when it typically launches new iPhone models.
4. U.S. Stock Futures Point To Mixed Open
U.S. stock futures pointed to a mixed open, with technology shares set to get a boost as sentiment improved after results from tech bellwether Apple topped Wall Street forecasts.
At 5:30AM ET, the tech-heavy NASDAQ 100 futures indicated a gain of 12 points, or about 0.2%, at the open.
However, the blue-chip Dow futures and S&P 500 futures indicated a slightly lower start to their respective trading sessions, as fears of an imminent escalation in the tariff war between the U.S. and China weighed.
Elsewhere, the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was a shade higher at 94.45.
In the bond market, U.S. Treasury prices edged lower, pushing yields higher across the curve, with the benchmark 10-year yield ticking up to around 2.98%, while the Fed-sensitive 2-year note was near a two-decade high of 2.68%.
5. Tesla Earnings Highlight Another Busy Earnings Day
Tesla (NASDAQ:TSLA) results due out after the market close will be the main event on the earnings calendar, in what should be another busy day of corporate earnings.
Wall Street analysts expect the company to report an adjusted loss per share of $2.78 on revenue of $4.03 billion. As has been the case in previous reports, analysts have been squarely focused on the Model 3, as well as its cash burn and potential capital needs in the coming years.
Bloomberg, citing sources, reported earlier that the company plans to invest $5 billion building a factory in China, as the trade war with the U.S. makes establishing production in the world’s fastest-growing auto market more imperative for the electric-car pioneer.
Besides Tesla, a slew of S&P 500 companies are also set to report results on Wednesday.
Before the market open, Sprint (NYSE:S), Chesapeake Energy (NYSE:CHK), Humana (NYSE:HUM), Sodastream (NASDAQ:SODA), Molson Coors (NYSE:TAP), and AMC Entertainment (NYSE:AMC) will be the highlights.
After the close, joining Tesla, will be Square (NYSE:SQ), Wynn Resorts (NASDAQ:WYNN), US Steel X, T-Mobile (NASDAQ:TMUS), Fitbit (NYSE:FIT), Marathon Oil (NYSE:MRO), and FireEye (NASDAQ:FEYE).