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By Bansari Mayur Kamdar and Johann M Cherian

(Reuters) -Wall Street’s main indexes were set to open higher on Monday as investors geared up for earnings from megacap growth and technology companies, with focus also on a rate decision from the Federal Reserve later this week.

Meta Platforms, Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) are reporting this week, with analysts expecting the big names to signal an end to the nearly year-long slowdown in their cloud businesses, while a pickup in digital ads is also expected to aid profits.

Last week, Netflix (NASDAQ:NFLX) and Tesla (NASDAQ:TSLA) posted less-than-stellar quarterly reports.

The electric-vehicle maker eased 1.5% in premarket trading after UBS downgraded its rating on the stock, while other megacap growth and technology shares edged higher.

The centerpiece event of the week is the Fed’s policy meeting, with the central bank expected to raise interest rates by 25 basis points on Wednesday.

A majority of economists polled by Reuters still expect this will be the last increase of the current tightening cycle, after data this month showed signs of disinflation, eliminating the need for the Fed to lift rates further and supporting the thesis that has helped buoy stocks in recent weeks.

“There’s a real concern that either the Fed will be too hawkish or earnings and forecast will be weaker than expected,” said Thomas Hayes, chairman at Great Hill Capital LLC.

“I do think guidance (for growth stocks) will be better than expected because demand related to generative artificial intelligence is literally unlimited.”

As of Friday, second-quarter earnings are expected to decline by 7.9%, according to Refinitiv data.

Analysts expect second-quarter earnings to decline by 7.9%, according to Refinitiv data.

The tech-heavy Nasdaq has rallied 34% so far this year, outperforming its Wall Street peers, as rate-sensitive megacap growth companies jumped on hopes of an end to the Fed’s tightening cycle and optimism over AI.

At 8:31 a.m. ET, Dow e-minis were up 27 points, or 0.08%, S&P 500 e-minis were up 7 points, or 0.15%, and Nasdaq 100 e-minis were up 38.25 points, or 0.25%.

The S&P 500 and the Dow ended last week higher with the latter posting its longest winning streak since 2017, helped by strong quarterly reports from healthcare and financial companies.

Toymaker Mattel (NASDAQ:MAT) rose 1.3% as the “Barbie” movie set a record as the biggest domestic debut of 2023, while shares of distributor Warner Bros added 1.6%.

AMC Entertainment (NYSE:AMC) jumped 36.4% after a judge blocked the theater chain’s stock conversion plan that risked diluting investors’ holdings in the company. AMC’s preferred shares fell 2.2%.

Domino’s Pizza (NYSE:DPZ) shed 1.2% after the world’s largest pizza chain missed quarterly revenue estimates, as increased delivery fees and higher prices hurt demand for its pizzas and chicken wings.

 

Exchange operator Nasdaq trimmed the weight of a handful of companies that make up close to half of the Nasdaq 100 to address “overconcentration” in the benchmark.

Also on tap on Monday, S&P Global (NYSE:SPGI) is expected to show its flash services sector PMI fell to 54.1 from 54.4 in June, while the closely watched flash manufacturing PMI likely rose to 46.4 in July from 46.3 in the previous month.

 

Wall Street eyes higher open ahead of more Big Tech earnings, Fed decision