The Daily Breakdown takes a look at the markets ahead of the Federal Reserve’s latest meeting and interest rate decision.
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Wednesday’s TLDR
- Fed not expected to cut rates
- Disney pops on earnings
- Uber slips on revenue miss
What’s Happening?
It’s Fed Day! At 2 p.m. ET today, the Federal Reserve will release a statement and a decision on interest rates.
According to current probabilities, there is a 97% chance that the Fed will leave rates unchanged at this meeting. There is a possibility the Fed will cut rates next month, but currently, the consensus expectation for the next rate cut is at the Fed’s meeting on July 30th.
After the initial announcement, Chairman Powell will read some prepared remarks at 2:30 p.m., followed by a Q&A session with reporters. With investors not expecting a rate cut this month, they’ll look for clues on future rates from Powell’s commentary.
The timing is good.
That’s as a slew of data was released last week, including the monthly jobs report, the first GDP reading for Q1, and the latest PCE inflation figures. There’s a lot for the Fed to consider, but it gives them the most up-to-date information ahead of today’s announcements.
I expect Powell to be guarded about future rate decisions, sticking to the wait-and-see approach we’ve seen in recent meetings. But he’s also been constructive on the economy and the labor market, so let’s see how the Fed views things now.
On the earnings front: After the close, we’ll have earnings from Carvana, Arm Holdings, DoorDash, Occidental Petroleum, and more.
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The Setup — American Tower
American Tower is a well-known REIT. Shares are up 22% so far this year and are up about 25% over the past 12 months.
The company recently reported earnings, which resulted in a notable rally that broke the stock out over downtrend resistance. Notice how before earnings, the stock had continued to find support from the rising 50-day moving average.
Now trading sideways, bulls will want to see the stock stay above the $210 to $212 area, which would keep AMT above the 50-day moving average and prior downtrend resistance. If it can continue higher, bulls will want to see if it can clear the April high near $234.
As a REIT, American Tower is known for its dividend payout. While not the largest payout in the space, its 3% dividend yield is attractive for buy-and-hold investors looking for income.
The average analyst price target currently sits around $244.
Options
For some investors, options could be one alternative to speculate on AMT. Remember, the risk for options buyers is tied to the premium paid for the option — and losing the premium is the full risk.
Bulls can utilize calls or call spreads to speculate on further upside, while bears can use puts or put spreads to speculate on the gains fizzling out and AMT rolling over.
For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street is Watching
DIS
Shares of Disney are trading higher this morning after the firm beat on earnings and revenue expectations. Further, management lifted its adjusted earnings outlook, now expecting to earn $5.75 a share this year. If the firm does, it will represent 16% growth from 2024. The average analyst price target is currently near $125.
UBER
Shares of Uber are slightly lower this morning after the firm beat on earnings but missed on revenue expectations. Management provided an upbeat outlook for the current quarter, including gross bookings estimates between $45.75 billion and $47.25 billion for the current quarter, above analysts’ estimates of $45.83 billion.
AMD
Advanced Micro Devices initially rallied in yesterday’s after-hours session, but is only up slightly this morning despite beating on earnings and revenue estimates and providing revenue guidance for next quarter that was above analysts’ expectations.. Check out the charts for AMD.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.