The U.S. stock market may get off to a muted start this morning, as a new week on Wall Street commences. The S&P 500 Index futures had been advancing earlier this morning, but are now hovering near the neutral line. In the days ahead, investors will be reviewing the latest economic releases and corporate profit reports, paying close attention to the retail sector, in particular.
In the economic arena, there are no notable reports slated for this morning. Tomorrow, retail sales for the month of July will be published. Most analysts think sales advanced 0.4% over the prior month, representing a constructive showing. Healthy consumer spending is normally seen as a positive economic development, however, ballooning credit card balances are starting to become a concern, and could lead to problems for both borrowers and lenders down the road. On Wednesday, housing starts and building permits for the month of July will be reported. In addition, the FOMC (Federal Open Market Committee) will deliver the minutes from its latest meeting. Investors will be carefully reviewing this item, in an effort to better understand the central bank’s policy decisions.
In the corporate arena, nearly 85% of the companies in the S&P 500 Index have already posted their second-quarter results. Most companies delivered soft comparisons for the quarter, due to inflationary pressures and a challenging economic environment. Nonetheless, investors have remained upbeat, and are even anticipating that profits will improve nicely in the second half of the year. Hopefully, this recovery will materialize, since stocks are trading at elevated price-to-earnings multiples and expectations are running high. This week we will hear from a number of leading retailers, including Home Depot (HD), Target (TGT), and Walmart (WMT). A few important technology companies will also be posting their numbers.
From a technical perspective, the stock market has been under some pressure lately. Specifically, the S&P 500 Index has pulled back about 3% from the high-water mark reached at the end of July. The broader Index is now sitting at its 50-day moving average, situated at the 4,435 level. It remains to be seen if the market will find support at this key technical level, or if a deeper pullback will unfold. The latest economic and corporate news will be a major consideration. Investor sentiment, too, will play a major role in determining the market’s direction. – 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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