US stocks open higher with Fed decision on deck

U.S. stocks opened higher ahead of a pivotal Federal Reserve announcement in the afternoon.

The broad S&P 500 gained 5 points to trade near 6,376 after the opening bell, while the Dow Jones Industrial Average was up 75 points, 0.2%, near 44,708. The tech-laden Nasdaq Composite index jumped 44 points, 0.2%, to start the day near 21,143.

Almost no one predicts the Fed will lower rates, but economists predict that the decision for the first time since 1993, will not be unanimous with two Fed governors dissenting.

Investors will look for clues in the Fed's policy statement and at Fed Chairman Jerome Powell's post-meeting press conference for when the Fed might be ready to lower rates. The CME FedWatch tool that measures the likelihood that the Fed will change the Federal target rate at upcoming meetings according to market traders shows a 63.4% chance for a September rate cut. October holds a 49.2% chance.

Lower rates make borrowing money cheaper, which may give businesses and consumers more reason to spend, boosting the economy and the stock market.

“The question is whether they will convey a greater openness to cutting rates at their September meeting,” said Bill Nelson, chief economist at the Bank Policy Institute. “For several reasons, my guess is that they won’t. The FOMC statement and Chair Powell’s press conference will aim to strike the same neutral tone as in June.”

The 10-year US Treasury note gained about 4 basis points to about 4.37% in the morning.

Ongoing trade deal talks

U.S. and Chinese officials continue to hold trade talks in Stockholm, Sweden, as an agreement to extend a tariff truce that expires on Aug. 12 remains elusive. Chinese trade negotiator Li Chenggang told reporters that both sides agreed on maintaining the truce, but Treasury Secretary Scott Bessent said that was jumping the gun. Any extension would have to be approved by President Donald Trump, he said.

Meanwhile, South Korean officials met with U.S. Commerce Secretary Howard Lutnick in Washington to try to prevent an increase in tariffs on Korean exports before an Aug. 1 deadline.

Economic news

U.S. GDP expanded at a 3% annual pace in the second quarter, the government said Wednesday morning, more than economists had forecast. Most experts believe that readings on the economy will be skewed by the effects of the White House's tariff announcements.

Private employers hired 104,000 workers in June, payroll processor ADP said Wednesday, also topping consensus estimates.

Earnings and company news

Investors also will be looking at key earnings reports for direction. More so-called Magnificent Seven influential megacap technology stocks are slated to report this week. They include Facebook-parent Meta Platforms and software giant Microsoft after the market closes Wednesday. Investors will want to see if artificial intelligence spending remains intact. AI spending has fueled the rally in many tech stocks this year.

Other companies due to report after the close include Robinhood, Qualcomm, Arm Holdings, Lam Research, Carvana and Allstate.

Shares of Novo Nordisk, maker of weight-loss drugs Wegovy and Ozempic, fell more than 6% on Wednesday after losing more than 20% Tuesday when the company warned on full-year sales growth.
Starbucks reported a decline in US same-store sales after the bell on Tuesday, but the decline was not as bad as Wall Street expected. Shares were 3% higher in early trade.
Kraft Heinz shares ticked higher after the company announced a loss in its most recent quarter. Sales were higher than analysts had forecast, however.

American Eagle controversy

Shares of American Eagle Outfitters were down nearly 3% after soaring earlier following an online backlash to actress Sydney Sweeney's commercial for the company's jeans. Some audiences felt the ad was in bad taste, with Sweeney's dialogue drawing allusions to eugenics.

(This story was updated with new information.)