The U.S. stock market seems poised to move higher this morning, as traders look ahead to a busy week of new information. Over the next few days, investors will turn their attention to the Federal Reserve, the nation’s employment situation, and the corporate profit outlook. As we were publishing this report, the S&P 500 Index futures were up roughly 23 points (0.42%) in pre-market trading.
Investors will be focusing on two major economic events this week. On Wednesday, the FOMC (Federal Open Market Committee) will conclude its two-day policy meeting with an interest-rate announcement. Few expect that a rate cut will be approved at this time. However, there is a sense that some action will be taken at the September meeting. Further, many will be paying close attention to Chairman Jerome Powell’s commentary, looking for confirmation that rate cuts are actually on the near-term horizon. A press conference, including a question and answer session, normally follows the policy meeting, as well. Elsewhere, on Friday the government will deliver the July employment report. Investors expect the numbers will show that roughly 190,000 jobs were added to the economy during the month, down from the figures posted in June. The headline unemployment rate is expected to remain just above the 4% mark.
In the corporate sector, the second-quarter earnings season is heating up. This week, we will hear from a number of leading technology companies, including Microsoft (MSFT), Apple (AAPL), and Amazon.com (AMZN). These corporations have been spending heavily to develop AI (artificial intelligence) applications. At this point investors want to see that these ambitious AI programs can eventually deliver tangible returns. It should also be mentioned that analysts began the current earnings season with very high expectations, which may make it difficult for some companies to impress.
Technically, the stock market has pulled back slightly over the past couple of weeks. Specifically, the S&P 500 Index has retreated roughly 5% from the high-water mark reached in mid-July. However, a number of technology issues have fallen significantly, creating additional volatility. A period of consolidation at this juncture is not surprising, and may even prove to be a healthy development. For one, investors finally seem to be moving capital out of the technology sector and into other equity groups. In addition, shares of small-and mid-sized companies have been receiving some attention lately. This dynamic should provide broader support for the stock market. – Adam Rosner
At the time of this article’s writing, the author had positions in Apple and Amazon.com.
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