* Major stock indexes higher; small caps outperform
* Financials lead S&P sector gains; utilities lag
* Dollar off, gold edges up; crude rises; U.S. 10Y T-Nt yld ~0.59%
NEW YORK, July 29 (Reuters) - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by Stephen Culp. Reach him on Messenger to share your thoughts on market moves: stephen.culp.thomsonreuters.com@reuters.net
WAITING FOR THE FED (1300 EDT/ 1700 GMT)
While market strategists are not expecting any big policy announcements when the U.S. Federal Reserve speaks its mind after it wraps up its two-day meeting this afternoon (in about an hour), they are nonetheless laser-focused on what the central bank has to say.
Edward Moya at OANDA expects the Fed to remind markets it is ready to do more if needs to, but it's not ready to commit to yield curve control or a lock-in of future rate hikes to overshoot their inflation targets.
Eric Johnston, head of equity derivatives and cross asset at Cantor wrote that while the market has not performed well following the last three meetings, he thinks it will be different this time. This may just be because he expects a relief rally after Congressional hearings starting at noon, where CEOs from Amazon.com , Apple Inc , Facebook and Google parent Alphabet answer questions about potential antitrust issues.
Jim Reid, research strategist at Deutsche bank, says the Fed will likely set the stage for more consequential September announcements on guidance, the balance sheet and a policy review. The strategist notes that Fed Fund futures show market expectations for U.S. rates floored at zero for at least the next three years. But Reid also points out that over the last 20 years the market has rarely been that accurate. Its expectations were too hawkish for 6-7 years after the financial crisis and just as the market started to lower its expectations "along came a larger hiking cycle than expected between 2016-2018."
"Perhaps the only way that the market will be correct going forward is if the Fed leaves rates at zero for a long period of time and uses other measures to loosen policy," Reid said.
Whatever happens at 2PM EDT, as Samuel Beckett wrote in Waiting for Godot: "We always find something, eh Didi, to give us the impression we exist?"
(Sinéad Carew)
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CHIP INDEX: ABOUT TO GET GLITCHY ON THE CHARTS? (1207 EDT/1607 GMT)
The Philadelphia SE Semiconductor Index is gaining more than 1% on Wednesday with Advanced Micro providing the biggest boost. With this, the SOX is up nearly 13% year-to-date and on track for an all-time high monthly close in July.
That said, the index has come close to long-term channel resistance. Near touches of this log-scale monthly barrier in 2018 and 2020 preceded significant downside turns. (Click on chart below)
Indeed, in March 2018, the SOX topped 4.1% shy of the resistance parallel, prior to experiencing a 27.2% slide into its December 2018 trough.
Earlier this year, the SOX stalled 4.6% shy of the line, and then suffered a 1-month 37.8% collapse.
With this month's push to a high of 2,126.64, the index once again came within 4.6% of the resistance parallel, which now resides at about 2,225. Thus, as the index flirts with this barrier, risk may build for some form of top.
There is another concern. Despite the SOX being on pace for a record high monthly close, its relative strength $(RS)$ vs. the Nasdaq Composite is lagging. The RS line topped in December of last year.
Of note, monthly closing SOX peaks in 2006, 2015 and 2018 that were accompanied by the RS line either failing to eclipse its most recent high, or diverging, also preceded major declines.
Therefore, a SOX reversal below its July trough, at 1,966.04, may offer the potential for intensifying downside pressure on this key sub-sector within tech.
(Terence Gabriel)
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PENDING HOME SALES RETURN TO PRE-COVID LEVELS (1115 EDT/1515 GMT)
The housing sector continues to demonstrate that its recovery is built on a more solid foundation than the rest of the economy.
Contracts to buy previously-owned U.S. homes increased by 16.6% in June, according to the National Association of Realtors.
It was a bigger increase than the 15% consensus, and an expected deceleration from the whopping 44.3% surge in May.
The index has now returned to where it was before widespread pandemic-related shutdowns brought the economy to a grinding halt.
Recent housing indicators, including homebuilder sentiment, housing starts and home sales, have underscored the sector's resiliency relative to other areas of the economy, still taking its first steps to recovery in the midst of its sixth month in recession.
Notably, data released on Tuesday showed the U.S. home ownership rate jumped last quarter to its highest level in nearly 12 years.
"Presumably, the June data captures some of the contract signings which were deferred during lockdown," writes Ian Shepherdson, chief economist at Pantheon Macroeconomics, who added "Housing is the strongest major sector of the economy right now."
Indeed, massive job losses due to economic lockdowns disproportionately affected hourly workers, who typically aren't homebuyers. And low mortgage rates are helping fuel the rebound.
Speaking of mortgage rates, the average 30-year fixed contract rate held steady last week at a very low 3.20%, according to the Mortgage Bankers Association (MBA).
However, mortgage demand edged lower. Applications for loans to purchase homes and refinance existing mortgages
, both dipped.
The drop in demand indicates "that prospective first-time buyers are being impacted more by the rising economic stress caused by the resurgence in COVID-19 cases, as well as the uncertainty on how the next round of government support will take shape," writes Mike Fratantoni, chief economist at MBA.
The Commerce Department released its advance takes on June wholesale inventories and goods trade balance.
Product stored in wholesale warehouses decreased by 2%, an acceleration of the 1.2% decline in May, while the goods trade gap narrowed to $70.64 billion.
The Commerce Department's initial take on second-quarter GDP is due tomorrow, with economists projecting a record 34.1% plunge.
Buyers returned to the fold in morning trading, sending all three major indexes higher in advance of the U.S. Federal Reserve's rate decision and economic outlook.
(Stephen Culp)
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S&P 500: FALLS OUT OF THE GAP (0915 EDT/1315 GMT)
The S&P 500 stepped into its February 24 gap last week. However, the task of filling that gap proved too difficult with the benchmark index falling back, and solidifying a daily momentum divergence. (Click on chart below)
Indeed, the SPX spent 3 days last week exploring its unfilled February 24 breakaway gap to the downside, that ran from 3,259.89 to 3,328.45. The index hit a high of 3,279.99 on Thursday before then reversing, leaving 48.46 points of still-open chart space.
Meanwhile, as the SPX was attempting to fill the gap, and reaching a 5 month high, daily momentum was lagging. The RSI reached 71.033 which was well shy of its early June peak at 83.329. With the subsequent weakness, a bearish divergence is now in place.
Of note, in the wake of the RSI's December 2019 top, it took 2 distinct lower peaks prior to the SPX's February-March collapse. In any event, at a minimum, the single instance of divergence now in place can put the SPX at risk for a deeper decline.
The S&P 500 will need to make another attempt to fill the gap, along with its RSI breaking above 71.033, to suggest the potential to challenge the 3,393.52 record high.
(Terence Gabriel)
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WALL STREET SET TO GAIN AS FED WRAPS IT UP (0855 EDT/1255 GMT)
U.S. equity index futures suggest all three major U.S. stock indexes will kick off Wednesday's session with opening gains.
The U.S. Federal Reserve is set to release its rate decision at 2:00 EDT. While few expect any change in monetary policy today, or in the near future, the accompanying economic outlook will be closely scrutinized for what the central bank expects next year and beyond.
Another round of partisan wrestling over a new stimulus bill is expected to begin as Republican and Democratic lawmakers try to narrow their differences with three days to go before millions of Americans run out of unemployment benefits.
Earnings season is in full-throttle. Boeing Co reported a larger-than-expected quarterly loss and announced production cuts.
Industrial conglomerate General Electric Co's quarterly loss also surprised to the downside despite the company burning through less cash than expected.
However, General Motors Co's loss for the March-June quarter was narrower than consensus estimates, aided by pickup sales and cost-cutting.
Meanwhile, the CEOs of Amazon.com Inc , Facebook Inc
, Apple and Alphabet's Google are set to testify to a panel of lawmakers.
Here's your premarket snapshot.
(Stephen Culp)
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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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