The U.S. stock indexes traded in a narrow range Monday, ending the session with a mixed performance to start the week.
Earnings season goes into high gear this week, with a raft of reports coming from heavy hitters including Alphabet (GOOG), Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), Merck & Co. (MRK), and Pfizer (PFE). Meanwhile, there’s plenty of economic news to keep investors busy. Today at 10 AM we get the Consumer Confidence Index for July, where a modest decline is expected. At the same time, new home sales for June will be announced, with consensus calling for the seasonally adjusted annual rate (SAAR) to fall about 36,000, to 660,000 units. Tomorrow brings durable goods orders and pending home sales for June where, again, both figures are widely expected to show declines. This will be followed on Thursday by the initial estimate for second-quarter GDP, which should show some expansion after the 1.6% decline reported for the March period. (Should GDP come in negative, it would be a technical signal that the economy is in a recession.) We also get the latest on initial and continuing jobless claims. The week wraps up with the latest inflation figures for June coming out Friday morning, along with reports on real disposable income and consumer spending for last month.
While all of these reports will be closely perused by traders and investors, they are all overshadowed by Fed Chairman Jerome Powell’s press conference after the Federal Open Market Committee (FOMC) wraps up its two-day meeting on Wednesday. What the lead bank announces will carry more weight than anything Corporate America has to report, as its latest interest rate hike will have far-reaching repercussions for businesses and consumers alike. While the Federal Reserve is focused on reining in inflation by tightening the money supply, it is yet to be determined just how high interest rates will have to go to achieve that goal. As it becomes more expensive to borrow, corporations and individuals are likely to increasingly cut back on expenditures, thereby steadily reducing overall demand, and thus inflation. The markets will be closely listening to what Powell has to say in an effort to gauge just how much higher interest rates may have to go. As it stands, a hike of at least three-quarters of a percentage point appears likely to be announced Wednesday, with more to follow in the months ahead. Until the Fed signals that it is ready to ease up on monetary tightening, the current bear market is likely to linger.
Looking at Monday’s results by the numbers, the Dow Jones Industrial Average closed up 90 points, while the more-diversified S&P 500 gained 5. The tech-laden NASDAQ composite, however, retreated 54 points. Breaking it down by sectors, energy stocks led the advancers with a gain of 3.7%, while utilities were up 1.3%. At the opposite end of the spectrum, consumer discretionary stocks lost 0.9%, while technology shares were down 0.6%.
As we approach the start of a new trading day, U.S. stock futures are pointing to a negative open. Elsewhere, Asian markets were mostly up overnight, while stocks in Europe are mixed. Meanwhile, oil futures are up about 1.6%, to around $98.25 a barrel.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
