Powell testimony, Morgan Stanley earnings — What you need to know in markets on Wednesday

Myles Udland
Markets Reporter

Well, that was surprising.

After Netflix’s (NFLX) earnings report disappointed on Monday afternoon, the stock tanked and took the whole tech sector down with it. And as U.S. investors left the office Monday night, it appeared that Tuesday could be an ugly day in markets.

And then it all turned around.

Netflix shares ended up paring their losses from 14% in after hours trading to a loss of 5% against Monday’s close, while its FANG compatriots Facebook (FB), Amazon (AMZN), and Google parent company Alphabet (GOOGL) each logged new record highs.

And as tech stocks rallied so too did the broader market, with the tech index making a record high, closing at 7,855.12, while the S&P 500 gained 0.4% and the Dow added 0.2%.

So at least for now, it appears it will take more than one poor quarter from Netflix to topple the FANG names and to bring the broader market down.

Now on Wednesday, earnings will still be a focus with results expected from S&P 500 members Morgan Stanley (MS), Textron (TXT), and Abbot Labs (ABT) in the morning, while eBay (EBAY) and IBM (IBM) will be among the notable reporters after the market close.

The economics calendar will bring investors the June data on housing starts and building permits, as well as the latest Beige Book from the Federal Reserve. Investors will also hear from Federal Reserve chair Jerome Powell for a second day as he takes questions from members of the House of Representatives during his semi-annual testimony on Capitol Hill.

Powell’s appearance before the Senate Banking Committee on Tuesday generated few major headlines, though Powell was pressed several times on the lack of wage growth and whether or not the yield curve’s flattening was of concern to the Fed.

In prepared remarks released as his testimony began, Powell indicated that he believes it is best “for now” for the Fed to continue raising rates in a “gradual manner,” which investors interpreted as indicating two more rate hikes are coming from the Fed this year.

Federal Reserve Board Chair Jerome Powell testifies before the Senate Committee on Banking, Housing, and Urban Affairs on ‘The Semiannual Monetary Policy Report to the Congress’, at Capitol Hill in Washington on Tuesday, July 17, 2018. (AP Photo/Jose Luis Magana)

Tuesday was also, for a moment, appearing to be a calmer day on the political and trade side of things after President Trump’s deference to Russian President Vladimir Putin in a press conference on Monday was roundly criticized by members of both parties.

During an afternoon press appearance on Tuesday, however, Trump walked back on some of his comments, specifically indicating that he does support the findings of U.S. intelligence agencies that Russian operatives did meddle in the 2016 presidential election.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland