US Stocks, Treasuries Rise as Brent Slides Below $91 Ahead of Fed, Earnings

Brent crude drops below $91 a barrel

Market prices in 66% chance of a Fed hold this week

US stocks and Treasuries rose on July 27 as oil prices tumbled on signs that a halt in hostilities between the US and Iran would hold. Investors are also bracing for a week packed with earnings from major companies and the Federal Reserve’s rate decision.

At 10 a.m. in New York, the S&P 500 was up 0.5%, while the Nasdaq Composite gained 0.5%. The Dow Jones Industrial Average rose 0.9%.

September Brent crude, the global benchmark, fell 6.2% to $90.79 a barrel after climbing to as high as $100 last week. West Texas Intermediate futures dropped 5.7% to $83.83 a barrel. The selloff accelerated after reports that the US had halted attacks on Iran and that Kazakhstan’s oil export terminal had resumed shipments, easing supply concerns.

The yield on the 10-year US Treasury, which briefly topped 4.7% last week, fell 3 basis points to 4.650%. The two-year Treasury yield, which is more sensitive to Fed policy, was little changed at 4.32% ahead of the central bank’s meeting.

Nvidia fell 2%, while Micron Technology and SK Hynix also edged lower. Intel and Advanced Micro Devices declined as well. Alphabet rose 2%.

Some 170 companies are scheduled to report quarterly results this week, including major technology firms such as Amazon, Apple, Meta Platforms and Microsoft.

CNBC reported that if spending on artificial intelligence rises more than expected, investor concerns could intensify and weigh on those stocks, as happened with Alphabet last week. At the same time, heavier AI spending would bolster the case for continued demand growth for semiconductor and equipment makers tied to the buildout.

Ken Mahoney, chief executive officer of Mahoney Asset Management, said continued spending is a risk for hyperscalers. If they cut spending or slow the pace of increases, however, the market backlash could be even greater.

The Fed is due to release its rate decision and economic projections on July 29. Experts expect the central bank to leave rates unchanged this month and raise them in September. As of this report, CME Group’s FedWatch tool showed markets pricing in a 66% chance that the Fed leaves its benchmark rate unchanged this week and a 33% chance of a quarter-point increase. That compares with nearly an 80% chance of a hold two weeks earlier, before the US and Iran resumed airstrikes, indicating that expectations for a pause have faded while the odds of a hike have increased.

The S&P 500 and Nasdaq fell 0.6% and 2.1%, respectively, last week, extending weekly declines to a second straight week for both indexes. The Dow slipped 0.4%, marking its third consecutive weekly loss.

Kim Jung-a, contributing reporter