Before the Bell: Traders Expect Good News from FOMC; Game Makers Head in Opposite Directions
The Federal Reserve interest rate decision to be announced later Wednesday is the morning's leading issue. A share price jump approaching 1,000% in two days is also getting a lot of attention.
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Premarket action on Wednesday had the three major U.S. indexes trading lower. The Dow Jones industrials were down 0.4%, the S&P 500 down 0.31% and the Nasdaq 0.18% lower.
All 11 market sectors closed higher Tuesday, with consumer cyclicals and materials (both up 2.22%) leading the charge. Utilities (0.71%) and energy (0.89%) posted the smallest gains. The Dow closed down 1.09%, while the S&P 500 closed up 1.46% and the Nasdaq up 1.67%. A smaller-than-expected increase in the fourth-quarter employment cost index lifted hopes that the Federal Reserve will pause its rate hikes, not just make them smaller.
Tuesday’s trading volume was above the five-day average. New York Stock Exchange winners led losers by 2,636 to 478, while Nasdaq advancers led decliners by 3 to 1.
The Federal Open Market Committee (FOMC) releases its latest interest rate decision Wednesday afternoon and the consensus economists’ estimate calls for a 25-basis-point increase in the lending rate.
Among S&P 500 stocks, A.O. Smith Corp. (NYSE: AOS | AOS Price Prediction), a maker of water heaters, heat pumps and other specialty mechanical devices, added 13.67%, after beating expected quarterly earnings per share (EPS) and revenue. Oil refiner Phillips 66 (NYSE: PSX) dropped 5.78%, after missing the consensus EPS estimate due to lower prices for refined products and a reduced crack spread, the difference between what it pays from crude and what it realizes in pricing from producing two barrels of gasoline and one barrel of distilled (diesel) products from three barrels of crude. The crack spread is typically referred to as 3-2-1.
In the video gaming world, one extraordinary move on Tuesday looks to be on track to continue again Wednesday. Motorsport Games Inc. (NASDAQ: MSGM), a subsidiary of privately held Motorsport Network, got a 700% boost to its share price on Tuesday after regaining full compliance with Nasdaq’s listing rules. In November, the company executed a 1-for-10 reverse stock split that left it with fewer than 500,000 publicly held shares (the minimum for listing on Nasdaq). The company is also not in compliance with Nasdaq rules requiring a majority of a company’s board to be independent. The stock traded up another 90% in early premarket trading on Wednesday.
On the other side of the gaming coin, Electronic Arts Inc. (NASDAQ: EA) traded down more than 11% Wednesday morning after reporting disappointing quarterly results and announcing a six-week delay in the release of its new Star Wars-themed game. The delay pushes the game’s release into the 2024 fiscal year, causing the company to lower its outlook for fiscal 2023, which ends in March.
Snap Inc. (NYSE: SNAP) traded higher Tuesday, but the bottom fell out after hours when the company’s quarterly earnings results included a warning that ad sales are likely to fall by 2% to 10% in the current quarter. This was not good news for Meta Platforms Inc. (NASDAQ: META). The company formerly known as Facebook reports quarterly results after markets close Wednesday and is widely expected to post weaker numbers based on falling ad sales. There is not a lot of argument about that. The issue is how bad will it be and whether Meta will have to fire more people in order to meet expectations.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
