Q2 Earnings, Economic Data: A Trigger-Heavy Week Looms Over Investor Sentiment
A mix of second quarter earnings coupled with economic data releases loom over the US markets this week.
The markets mostly recorded gains in the week ended Friday. The S&P 500 gained 1.2%, and the tech-heavy Nasdaq rose slightly on Friday, up 0.3%, to end the week up 1.7%. The Dow ended with a loss of 0.5% though it rose 0.3% on Friday.
Data on retail sales, industrial production, housing starts and consumer sentiment will likely steer the investor mood in the next five days.
The banking majors are reporting their earnings this week. JPMorgan Chase, Goldman Sachs, Bank of America, Wells Fargo, and Citibank are slated to make earnings announcements Tuesday. Morgan Stanley and financial services peer BlackRock (BLK) report earnings Wednesday.
Among other big firms, pharma major Johnson & Johnson, industrial giant Kinder Morgan and United Airlines have scheduled earnings report Wednesday. AI bellwether Taiwan Semiconductor Manufacturing Company, Netflix and UnitedHealth are among other major companies scheduled to roll out the numbers on Thursday.
The trajectory of the US inflation will be revealed when Consumer Price Index data is announced, according to a report. The University of Michigan’s bimonthly vibe check on consumer sentiment will be out Friday.
A strong first quarter earnings season exceeded market expectations, and investors would be hoping for another set of buoyant results as well as indicators on a return on the AI investment.
Margins will be a key factor “to potentially keeping up this torrid pace of earnings growth as corporate America seeks out AI productivity gains,” according to LPL Financial’s chief equity strategist Jeffrey Buchbinder.
Buchbinder expects chip majors Micron and Nvidia to power 40% of overall S&P 500 earnings growth and the AI infrastructure stocks to account for the remaining roughly 60%.
The earnings of the financial sector would be closely watched as expectations of blowout numbers driven by a blockbuster year for IPOs as well as huge trading volumes are high.
In the Consumer Price Index (CPI) figures for June being scheduled to be released on Tuesday, economists expect a slight drop of 0.1% on month, following a 0.5% rise in May. If this happens, it could be an indicator that the US inflation is beginning to ease.
The Producer Price Index (PPI) data numbers expected Wednesday, which measures wholesale inflation, is estimated to show a dip of 0.1% on month, following a rise of 1.1% in May.
The CPI and PPI are estimated to rise year-on-year by 3.8% and 6.2% respectively, still lower than 4.2% and 6.5% in May.
The core CPI numbers, which leaves out food and energy prices, is also estimated to show slower yearly growth.
These figures would shape the market view on a probable rate hike as the Federal Reserve is facing an uphill task to tame inflation to its 2% target as global tariffs and spiralling energy costs have kept it higher than its comfortable band.
The market sees Fed chair Kevin Warsh’s refusal to provide a forward trajectory outlook on inflation as a cue to remain highly data dependent. The Middle East conflict and the resultant surge in energy prices have stoked inflationary concerns across the globe. The conflict has again been reignited, triggering market concerns.
