The major U.S. indexes started the week on the downside. Second-quarter earnings season is about to kick into higher gear, and investors will be particularly interested in how Corporate America is dealing with high inflation, rising borrowing costs, and ongoing supply-chain disruptions. Indeed, traders will be very quick to react to any reductions in company guidance for the quarters ahead. Among the top companies reporting this week will be Delta Airlines (DAL), along with several major financial firms including Citigroup (C), JPMorgan Chase (JPM), Morgan Stanley (MS), and Wells Fargo (WFC).
On the economic front, Wednesday’s Consumer Price Index (CPI) report for June will be of particular interest. Consensus estimates are calling for a year-over-year increase of 8.8%, versus the 8.6% rise reported in May. If the market is correct, it will indicate that the Federal Reserve still has a ways to go in its efforts to rein in inflation. This includes further interest-rate hikes and sales of treasuries and mortgage-backed securities to decrease the amount of liquidity (or money supply) in the economy. Also of interest will be Friday’s report on retail sales for June, as market participants watch for any indication that the consumer may be cutting back on spending in light of rising prices and slowing economic growth.
By the numbers, the Dow Jones Industrial Average closed down 164 points on Monday, or half a percent, the broader S&P 500 shed 44 points (-1.2%), and the tech-focused NASDAQ fared the worst, losing 262 points, or about 2.3%. Looking at the major market sectors, most groups ended the day in the red, with the largest losses sustained by communication systems (-2.8%), consumer discretionary (-2.8%) and technology shares (-1.4%). In the plus column, utilities gained .6%.
As we approach the opening bell this morning, U.S. stock futures are mostly to the downside for the start of today’s trading. Elsewhere, Asian markets were mixed overnight, while stocks in Europe are modestly in the red. Meanwhile, oil futures are down more than 4%, to about $99.50 a barrel, as rising Covid-19 cases in China have reignited fears of falling demand.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
