The most important economic event of July has come and gone.
For the rest of the month, investors will focus most of their attention on the corporate earnings calendar.
Netflix (NFLX) will be the first major tech company to report quarterly results in the current reporting period, with the streaming giant set to report after the close on Thursday.
As the AI sector continues to dominate Wall Street, investors will be paying close attention to earnings from ASML (ASML) and Taiwan Semiconductor Manufacturing Company (TSM), which are scheduled to report on Wednesday and Thursday, respectively.
ASML is the leading maker of lithography machines, which allow companies to print their designs onto new chips. TSMC is the world’s largest chipmaker.
Elsewhere on the earnings calendar, reports from Goldman Sachs (GS), Morgan Stanley (MS) and Bank of America (BAC) will wrap up results from Wall Street’s biggest banks, while Dow members Johnson & Johnson (JNJ), American Express (AXP), UnitedHealth (UNH) and Travelers (TRV) are all set to report results.
Politics will also be on investors’ minds after Donald Trump survived an assassination attempt at a rally in Pennsylvania on Saturday. Business leaders were quick to react to the day’s events, condemning political violence and hailing the former president’s “courage under literal fire (Saturday night).”
The Republican National Convention is scheduled to be held this week in Milwaukee, where Trump will be officially nominated as the Republican presidential nominee.
The economic data calendar will be light, with the June retail sales report coming out Tuesday as the highlight. After May’s results showed a surprising slowdown in spending, investors and Fed watchers will be watching the results for any signs of further weakness in U.S. consumption.
The Oxford Economics team expects retail sales to decline 0.4% in June, although the overall decline will be driven by lower gasoline prices. “We expect underlying control group sales to rise 0.3%, which, together with lower prices in June, will translate into a strong increase in real consumption to end the second quarter,” the firm wrote in a note published Friday.
“The consumer is still healthy, supported by a labor market that is calming, not collapsing, and by the strength of household balance sheets.”
Thursday’s inflation data sent markets into disarray, with everything that was working (namely the Magnificent Seven names) coming under pressure and what had been left behind, notably small caps, soaring. Still, Friday’s rally allowed stocks to head into the weekend with another weekly gain.
July ➡️ September
June inflation data released last week appear to all but confirm prospects for a Federal Reserve rate cut starting in September.
A multi-year low in annual inflation and the first monthly decline in headline inflation since 2020 have pushed the odds that rate cuts will begin in the fall to more than 85%, according to CME Group data.
In June, headline inflation fell by 0.1% from the previous month and rose by 3% from a year earlier. On a core basis, which excludes food and energy costs, consumer prices rose by 0.2% from a month earlier and by 3.3% from a year earlier.
The Fed is targeting 2% inflation.
The June jobs report, released earlier this month, prompted the Fed to act in September. The rise in the unemployment rate to 4.1% indicated that the pace of cooling in the labor market appears to be accelerating and puts the labor market back in the central bank’s focus after nearly two years of inflation being its main concern.
Fed Chairman Jerome Powell’s speech on Capitol Hill last week made clear that the central bank’s decision this fall would be viewed as a political one by critics on both sides. But the economic rationale for a rate cut has only become clearer in recent weeks.
“Overall, economic data are the most supportive of a rate cut since the start of the year,” Wells Fargo economists Sarah House and Michael Pugliese wrote in a client note this week.
As Yahoo Finance’s Jared Blikre noted this week, the unemployment rate is now on the verge of triggering the Sahm rule, which measures the rate of increase in the unemployment rate and has been a leading indicator in each of the last nine U.S. recessions.
On July 31, Powell will hold a press conference following the Fed’s next policy meeting. That event, along with Powell’s speech at the Jackson Hole Economic Symposium in late August, will give the Fed chair plenty of opportunity to prepare markets for a September decision.
Weekly calendar
Monday
Economic data:New York Fed Empire State Manufacturing Index, July (-6 expected, -6 previously)
Earnings:Goldman Sachs (GS), BlackRock (BLK)
Tuesday
Economic data: Retail Sales, June (-0.2% expected, +0.1% previously); Import Price Index, June (-0.1% expected, -0.4% previously); Export Price Index, June (-0.1% expected, -0.6% previously); NAHB Homebuilder Sentiment, July (43 expected, 43 previously)
Earnings:Bank of America (BAC), Morgan Stanley (MS), UnitedHealth (UNH), Charles Schwab (SCHW), Interactive Brokers (IBKR), Progressive (PGR), PNC Financial (PNC), State Street (STT)
Wednesday
Economic data: Housing starts, June (+1.8% expected, -5.5% previously); Building permits, June (-0.6% expected, -3.8% previously); Industrial production, June (+0.4% expected, +0.9% previously); Federal Reserve Beige Book
Earnings:Johnson & Johnson (JNJ), United Airlines (UAL), ASML (ASML), Discover (DFS), US Bancorp (USB), Citizens Financial (CFG), Ally Financial (ALLY), Synchrony (SYF), Alcoa (AA), Kinder Morgan (KMI), Steel Dynamics (STLD)
THURSDAY
Economic data:Initial jobless claims, July 13 (228,000 expected, 222,000 previously); Continuing jobless claims (1.852 million previously)
Earnings:TSMC (TSM), Netflix (NFLX), Domino’s (DPZ), Blackstone (BX), Alaska Air (ALK), Abbott Labs (ABT), Novartis (NVS), Textron (TXT), Cintas (CTAS), Intuitive Surgical (ISRG), PPG (PPG)
Friday
Economic data: No major economic data to be published.
Earnings:American Express (AXP), Travelers (TRV), Halliburton (HAL), SLB (SLB), Fifth Third (FITB), Regions Financial (RF)
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