The U.S. stock market may open higher this morning, as investors prepare for a shortened trading week. (The financial markets will be closed Thursday the 4th for the Independence Day holiday). In the coming days, traders will receive a handful of economic releases, including the latest monthly employment report. Political developments on our shores and abroad, including how the French parliament lines up, may also have an impact on trading. As we were writing this update, the S&P 500 Index futures were ahead about 14 points (0.25%) in early morning trading.
In economic news, the ISM (Institute for Supply Management) Manufacturing Index for the month of June will be released today, with the ISM Services Index following on Wednesday. These reports are of importance, as they measure whether the economy is contracting or expanding. Also on Wednesday, the FOMC (Federal Open Market Committee) will publish the minutes from its latest meeting, and traders often pay attention to this release. Looking ahead, the main event this week will take place on Friday, when the government delivers the June employment report. Analysts expect the numbers to show that roughly 195,000 jobs were added to the economy last month, down from the 272,000 figure logged in May. The headline unemployment rate is expected to remain unchanged at the 4% mark. In addition, investors will want to see that wages have not been rising too much, especially since the Federal Reserve has expressed concerns about inflation in this category. Elsewhere, at the end of July, the Fed will hold a policy meeting, which will conclude with an interest-rate announcement. Most investors do not expect a rate change at this juncture, but the content and tone of any commentary provided will be scrutinized.
Few notable corporate profit reports are scheduled this week. However, on Wednesday we will hear from Constellation Brands (STZ), a producer of beer, wines, and spirits. Looking ahead, the second quarter earnings season will soon commence. The nation’s largest banks and financial companies will be the first to report their results. These companies tend to be economically sensitive, and their reports can be instructive.
Technically, the stock market has made considerable progress so far this year. However, the gains have largely come from the technology sector, while other parts of the market have struggled. Looking ahead, the next major catalyst will be the upcoming earnings season. It is critical that companies report solid numbers and offer encouraging guidance, especially given that stocks have already logged sizable gains and valuations appear elevated. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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