Dow futures rise more than 100 points, Alphabet leads tech higher

Stock futures rose Wednesday, led by a sharp gain in Google-parent Alphabet, as investors looked for guidance from the Federal Reserve on the future path of interest rates with a gradual reopening of the economy in sight.

Futures on the Dow Jones Industrial Average were up 160 points, or 0.7%. S&P 500 and Nasdaq 100 futures also traded higher. 

Alphabet shares gained 7.7% in the premarket after the tech giant reported a revenue growth decline that was less steep than forecast. The company’s YouTube ad revenues also beat expectations. 

Those gains lifted sentiment around other mega-cap tech stocks such as Facebook, which climber 3.8% before the bell. Amazon gained 1.5% while Apple and Netflix were both up at least 0.5%.

All eyes will be on the Fed’s monetary policy decision at 2 p.m. ET Wednesday. Investors will look to the central bank’s statement and chairman Jerome Powell’s virtual press conference for clues about how long interest rates will stay near zero as the economy seeks to emerge from coronavirus crisis.

“It doesn’t look like the Fed will raise interest rates beyond 0% until well-past the pandemic, which we think might be around 2023,” said Jim Caron, head of global macro strategies at Morgan Stanley Investment Management. “The market is pricing a recovery that starts in Q3, but there’s wide variability, and we need the Fed to give its input.”

While no one is expecting any change to its benchmark interest rate, the Fed could potentially adjust the rate on bank reserves and announce asset purchases targeted toward driving down longer-term rates.

Another big market catalyst will be a reading on U.S. gross domestic product at 8:30 a.m. ET. Economists surveyed by Dow Jones forecast the U.S. economy shrank by 3.5% in the first quarter as the pandemic disrupted economic activities. U.S. GDP grew by 2.1% in the fourth quarter.

Stocks fell slightly on Tuesday as a slide in mega-cap tech shares put pressure on the broader market. The S&P 500 ended the day 0.5% lower, but the equity benchmark is still up more than 10% this month alone.

President Donald Trump said in a press conference Tuesday the U.S. will “very soon” run five million coronavirus tests per day. The number of most tests the country has run was 314,182 on April 22, according to the Covid Tracking Project. The lack of testing remains an obstacle for many states anxious to reopen for business.

Meanwhile, earnings season remains in focus with Boeing reporting its first-quarter results before the opening bell on Wednesday. Facebook, Tesla, and Microsoft are set to drop earnings after the bell.

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