The market continues to hold a slim gain with the S&P 500 (SPX) staying 50 points above its 50-day moving average. The gains are more muted than in recent sessions as investors await this afternoon’s FOMC decision and another round of mega-cap earnings after the close.

Energy (XLE) is the strongest sector as crude oil prices surge amid renewed concern over a possible escalation in the conflict with Iran. Industrials (XLI) climbed to the best levels of the session driven by strong action in component Vertiv (VRT) following its quarterly results. Technology (XLK) is posting modest gains as weakness among several mega-cap names offsets strength elsewhere.

The move in oil is adding upward pressure on Treasury yields and, consequently, pressure on rate-sensitive sectors such as Real Estate (XLRE) and Utilities (XLU).

Economic Data

The US goods trade deficit came in at $134.9 billion, wider than the $130.2 billion consensus, driven by the surge in AI-related imports. This is the widest deficit since March 2025 and its third straight monthly increase.

Highlights:

• Exports +2.6% to $209.2 billion, third highest on record
• Imports +2.4% to $344.1 billion
• Capital goods imports, which include chips and telecom gear, +7.5% to $157.4 billion, up an astounding 77% YoY
• Industrial supplies imports -6% after soaring 17.1% in August

The latest Atlanta Fed GDPNow estimate for third-quarter 2026 real GDP sits at 3.27%, down from 3.41% yesterday, following this morning’s economic data.

Fed Decision

The Fed will announce its next interest rate decision at 2 PM ET as inflation continues to pose a problem. Overall, the market hasn’t been particularly receptive to Fed decisions, with the S&P 500 (SPX) falling on six straight FOMC decision days.

Mega Cap Earnings

Microsoft (MSFT) and Alphabet (GOOGL) results are on deck after the bell.

Alphabet (GOOGL)

Artificial intelligence (AI) spending will once again take center stage in Alphabet’s quarterly results as investors look for signs that its soaring investments are beginning to pay off. As a reminder, the company’s free cash flow turned negative in the second quarter. Investors are also looking for solid growth in advertising sales and Google Cloud revenue.

Historically, the stock has gapped up in three of the last five earnings reports.

Microsoft (MSFT)

Expectations are high following the company’s strong fiscal fourth-quarter results in July. The major focus will be on whether Microsoft can sustain momentum from its substantial AI investments. Investors are also looking for more clarity on the enormous cost of AI infrastructure, power constraints, and the returns on these investments.

Historically, the company has beaten EPS consensus, but the reaction has been mixed.

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