Fed meeting, Amazon earnings, troubled American consumers

Investing.com – The Federal Reserve concluded its latest policy-setting meeting late Wednesday, and Amazon's first-quarter results impressed. Crude oil prices have been hit by a huge build in U.S. inventories, and Wall Street looks set to start the new month on a negative note.

1. Powell takes center stage at end of Fed meeting

The central bank will conclude its latest two-day policy meeting later in the session, a major event for markets this week.

The central bank is widely expected to keep its benchmark overnight rate steady, so the main focus will be on Chairman Powell's remarks at the press conference, especially given that the central bank will not update its economic forecasts this time.

Progress on the Fed's 2.0% medium-term inflation target has stalled recently. The inflation rate released on Tuesday is a typical example. The inflation rate in the first quarter increased by 4.2% annually, which was the same as in the fourth quarter.

Given the sticky nature of recent inflation data, investors will be awaiting signs on whether the Federal Reserve still expects to cut interest rates at some stage this year.

In his last public comments before this week's meeting on April 16, Powell said, “Recent data clearly do not give us greater confidence, but rather suggest that it may take longer than expected to achieve that confidence” and continued Cut interest rates.

Currently, the futures market is barely expecting a 25 basis point rate cut by the end of the year, compared with a whopping 5 basis point rate cut at the beginning of the year.

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2. Futures fall ahead of Fed decision

U.S. stock futures were lower on Wednesday amid more corporate earnings and caution ahead of the Federal Reserve's latest policy decision.

As of 04:10 ET (08:10 GMT), the contract was down 35 points, or 0.1%, down 12 points, or 0.2%, and last down 80 points, or 0.5%.

Wall Street's major indexes struggled in April as sticky inflation data prompted investors to curb expectations for an early interest rate cut from the Federal Reserve.

Shares fell more than 4% last month, while the company fell 5% for its worst monthly performance since September 2022.

The Fed wraps up its latest policy-setting meeting later Wednesday [see above] This may keep volatility low.

The focus will also be on the ongoing quarterly earnings season, which includes results from companies including drugmakers Pfizer (NYSE: ), food giant Kraft Heinz (NASDAQ: ) and pharmacy chain CVS Health (NYSE: ) ahead of the open, chipmaker Qualcomm (NASDAQ: ) and food delivery service DoorDash ( NASDAQ: ) after the open.

Investors are also likely to keep an eye on March's labor mobility survey as well as data for April, especially ahead of Friday's report.

3. Amazon boosted by cloud demand in first quarter

Amazon (NASDAQ:AMZN) became the latest tech giant to report its latest quarterly results late Tuesday, largely beating expectations as interest in artificial intelligence fuels growth in cloud computing.

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First-quarter sales grew 13% to $143.3 billion, higher than market expectations of $142.5 billion, while net profit for the quarter more than tripled to $10.4 billion.

Importantly, Amazon Web Services, its cloud revenue unit, grew 17% to $25 billion, beating consensus estimates for 14.7% growth, and the unit is currently running at $100 billion in annual revenue.

“The company's renewed infrastructure modernization efforts, coupled with the appeal of AWS's artificial intelligence capabilities, are reaccelerating AWS' growth,” the company said on Tuesday.

The strong results came with some choppiness, however, as the company forecast revenue of $144 billion to $149 billion for the current quarter ending in June, missing the consensus estimate of $150.1 billion.

Still, Stifel remains a fan of the group, maintaining a “buy” rating and raising its 12-month price target to $228 from $224.

“Despite a lackluster quarter, the company has made progress on margins (with more to come), AWS is largely past the digestion stage, and advertising continues to increase,” Stifel analysts said in a note.

Amazon shares closed at $175 on Tuesday and rose 1.3% in after-hours trading.

4. U.S. consumers are feeling the pinch

Fed officials are likely to be laser-focused on inflation levels, but they may also be willing to listen to comments from some of the nation's largest consumer-focused companies, which say their customers are struggling.

“It's clear that widespread consumer pressure around the world remains,” McDonald's (NYSE: ) CEO Chris Kempczinski said during the fast-food chain's earnings call earlier Tuesday. “As prices for everyday expenses rise, consumers are increasingly concerned about themselves.” Be more discerning with every dollar you spend.”

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The fast-food chain reported a fourth straight quarter of declining sales growth as lower-income customers reined in spending.

Elsewhere, Starbucks (NASDAQ: ) on Tuesday lowered its annual sales forecast after reporting its first decline in same-store sales in nearly three years.

“We are still seeing the impact of a slower-than-expected recovery and very strong competition among value players in the market,” Chief Executive Laxman Narasimhan said on a post-earnings conference call.

Outside of food retail, 3M Co (NYSE: ) beat expectations in the first quarter, but the Scotch tape and Post-it note maker still said “consumer discretionary spending continues to be weak.”

5. Crude oil prices fall after U.S. inventories rise

Crude oil prices fell on Wednesday, extending a recent weak tone as U.S. inventories unexpectedly rose and strong crude output raised concerns about tight supply conditions.

Futures were down 1.1% at $81.03 a barrel as of 04:15 ET, while the contract was down 1.1% at $85.42 a barrel.

On Tuesday night, U.S. crude oil inventories increased by 4.9 million barrels in the week ended April 26, a higher than expected increase of 1.5 million barrels.

In a sign that oil supplies in the world's largest fuel consumer are not as tight as initially expected, separate data showed U.S. domestic crude output rose to 13.15 million bpd in February from 12.58 million bpd in January, just shy of It was the biggest gain since October.

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Crude oil prices fell to more than three-week lows on Monday as expectations grew that a ceasefire between Israel and Hamas could be imminent, easing tensions in the region and reducing the likelihood of oil supply disruptions.

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