Peter Nurse  

Investing.com — Wall Street’s dominant sector, tech, is poised to rise with Microsoft (NASDAQ) and Google parent Alphabet(NASDAQ:) posting more positive quarterly results after Tuesday’s close. At the annual budget meeting, the U.K. will likely announce a new spending program. The Bank of Canada is holding a policy-setting session. In addition, the U.S. stock market increases and crude oil prices fall. This is what you should know about financial markets Wednesday 27 October.

1. Technology giants shine

The tech companies continue to deliver impressive results, which has contributed to a large portion of Wall Street’s gains over the past year. 

Fresh off Monday’s healthy data from Facebook (NASDAQ:), both Microsoft and Alphabet, the owner of Google, released strong quarterly numbers after the close Tuesday. 

Microsoft, the software giant, beat all expectations in its first quarter. This was due to strong revenue growth at Azure, Azure’s cloud computing business.

Positive performances were also recorded by the company’s other business units, including Windows software, Teams messaging and LinkedIn professional social media platform.

Alphabet reported that its Google unit had exceeded expectations in third quarter advertising sales. The company saw an increase of 41%, to $53.1 billion, and this was despite the fact that it is now a Google subsidiary. The pandemic forced many people to spend more time online and this has led to increased demand for the services.

It was just $19 billion short in quarterly profits, which marked the third straight quarter of record profit.

2. New spending plans to be introduced by the U.K. Budget

Rishi Sunak, the U.K.’s Chancellor, will unveil his annual budget Wednesday. He is likely to relax the purse strings in an effort to lift the country from its pandemic-induced decline.

The U.K. Treasury has already stated, via email on Monday, that the public sector pay freeze will come to an end next year, citing a “solid economic recovery and encouraging signs in the labor market.”

While Sunak is set to keep a tight grip on the day-to-day spending by the various government departments, given the country’s massive budget deficit, he is also expected, at 1130 GMT, to announce a three-year spending plan to boost investment in  public transport and skills training.

This increase in spending will likely be possible due to an improvement of Britain’s growth projections. It gives the government more flexibility.

3. Stocks fall; earnings season continues

U.S. stocks will open slightly lower and retreat from records levels with the emphasis on strong results by tech giants Microsoft (see above).

At 5:15 AM ET they were flat at 0.1%. They were actually down 23 points or 0.1%.

Blue-chips and broad-based ended at record highs during the session before, thanks to an overall positive earnings season.

So far roughly 30% of the S&P 500 has reported earnings. These companies have reported earnings that have exceeded expectations by 82% and revenue estimates of 80%, respectively. 

The tech sector takes a rest Wednesday, but there are results due from the likes of Coca-Cola (NYSE:), McDonald’s (NYSE:), Boeing (NYSE:), General Motors (NYSE:) and Harley-Davidson (NYSE:) before the market opens.

4. Bank of Canada will continue tapering

The Bank of Canada holds its latest later Wednesday, and is widely expected to continue reducing its weekly government bond purchases, reining in the quantitative easing program that has supported the country’s financial system since the start of the pandemic.

It would have been the fourth such rollback in the last year by the central bank. This raises expectations about the possibility that the bank will increase interest rates soon.

The markets are pricing in four rate hikes next year as inflation has climbed well above the Bank of Canada’s 1%-to-3% control range. 

5. Crude slips as U.S. inventories grow

After oil stocks rose faster than anticipated last week, oil prices fell Wednesday. This suggests that there is still a lack of demand from the largest oil consumer in the world.

U.S. crude oil futures fell 1.7% to $83.22 per barrel at 5:15 am ET. Futures declined 1.3% to $84.53 per barrel at 84.53. Both contracts are retreating from multi-year highs.

Late Tuesday’s data from industry-funded sources showed that crude oil inventories rose by 2.3 million barrels during the week ended Oct. 22, exceeding the expected gain of 1.9 million barrels. 

The official U.S. data will be available later in the day.