Stocks Flat as Fed Decision and Tech Earnings from Meta, Microsoft Set to Shake Markets

U.S. stock futures held steady early Wednesday, as traders waited on the Federal Reserve's interest rate announcement and quarterly earnings reports from tech giants deeply invested in AI, namely Meta Platforms and Microsoft. Meanwhile, geopolitical tensions flared again, with the U.S. and Iran exchanging missile strikes, sending crude prices climbing once more.

At roughly 3:20 a.m. ET, futures tied to the Dow and Nasdaq didn't stray far from unchanged, while the S&P 500 futures edged up by 0.2%. On Tuesday, the main U.S. indices closed the session mixed, with the Dow jumping 1.03%, the S&P 500 edging up 0.21%, but the Nasdaq pulling back 0.22%. A weak performance from semiconductor stocks pressured the tech-heavy Nasdaq further.

Semiconductor shares have been under pressure lately, extending declines for four days and reaching levels not seen since May. The drag came partly from news of Chinese competition challenging American chipmakers, coinciding with Alphabet's recent decision to expand its capital expenditure budget. In South Korea, SK Hynix posted record profits but missed analyst targets, weighing on sentiment within the sector.

The spotlight is firmly on the Federal Reserve's rate decision following two days of policy talks. Fed Chair Kevin Warsh, a Trump appointee conducting only his second meeting, faces a delicate balancing act between battling inflation and accommodating economic growth. Inflation data from June showed a slight cooling, but renewed conflict in the Middle East, spiking oil prices over $100 a barrel last week, complicates the inflation outlook.

Markets currently price in about a 70% chance that the Fed will hold rates steady in the 3.5%-3.75% range, with just under a 30% chance of another hike. Warsh has indicated he won't give detailed guidance post-meeting, adding to the environment of uncertainty. The labor market, meanwhile, remains sluggish with modest hiring and layoffs balancing out.

After Tuesday's close, Meta Platforms will kick off a wave of tech earnings. The company raised its capital spending forecast for the year, indicating ongoing aggressive investments in AI infrastructure. However, raising eyebrows among traders are Meta's warnings about potential regulatory and legal obstacles in the U.S. and Europe, particularly regarding issues related to younger users.

Not far behind, Microsoft is also expected to report solid tech spending, projecting record capital expenditure for its 2026 fiscal year. But questions linger around the pace of adoption for its AI ventures, including partnerships with OpenAI and the uptake of AI tools like Copilot 365. Analysts are keeping a keen eye on Azure cloud revenue growth, expected to be around 39%-40%, still trailing Google's cloud expansion progress.

Geopolitical skirmishes in the Middle East reignited, driving crude and Brent oil futures up more than 3%. The U.S. and Saudi coalition conducted attacks on Iranian-backed militias in Iraq following ballistic missile strikes targeting U.S. forces in Jordan. Iran's refusal of a deal with Oman over the strategic Strait of Hormuz casts further doubt on regional stability, complicating supply angle risks in oil markets.

By early Wednesday, Brent crude hit $87.01 per barrel, while West Texas Intermediate inched above $82. This uptick in energy prices adds yet another piece to an already complex puzzle awaiting the Fed's monetary policy announcement and the tech sector's earnings season.