Finance

What to watch this week

Published

1 month ago

July 14, 2024

The biggest economic event of July is over.

For the rest of the month, investors will pay most attention to the corporate earnings calendar.

Netflix (NFLX) will be the first Big Tech company to report quarterly earnings during the current reporting period, with the streaming giant set to announce results after the close on Thursday.

And as AI continues to dominate trading on Wall Street, investors will be paying close attention to the results of ASML (ASML) and Taiwan Semiconductor Manufacturing Company (TSM), which are released on Wednesday and Thursday, respectively.

ASML is the leading manufacturer of lithography machines, which allow companies to actually print their designs on new chips. TSMC is the largest chip manufacturer in the world.

Elsewhere on the earnings calendar, reports from Goldman Sachs (GS), Morgan Stanley (MS) and Bank of America (BAC) will summarize the results of Wall Street’s biggest banks, while Dow members Johnson & Johnson (JNJ), American Express ( AXP), UnitedHealth (UNH) and Travelers (TRV) are all expected to report.

Politics will also be a top concern for investors after that Donald Trump survived an assassination attempt at a rally in Pennsylvania on Saturday. Business leaders reacted quickly to the day’s events and condemned political violence praising the former president “courage under literal fire [Saturday night].”

The Republican National Convention will be held in Milwaukee this week, where Trump will formally name the Republican nominee for president.

The economic data calendar will be sparse, culminating in Tuesday’s retail sales report for June. After May results showed a surprising slowdown in spending, investors and Fed watchers will be watching the results for signs of further weakness among the US consumer.

The Oxford Economics team expects retail sales to fall 0.4% in June, although this overall decline will be driven by a drop in gas prices. “We expect a solid 0.3% increase in underlying sales across the controls, which, as prices fall in June, will translate into a strong increase in real consumption to end the second quarter,” it wrote company in a note Friday.

“Consumers are still in solid shape, buoyed by a labor market that is cooling and not collapsing, and the strength of household balance sheets.”

Thursday’s inflation data turned the markets upside down, with everything that had been working (read: ‘Magnificent Seven’ names) coming under pressure and what had been left behind, especially small caps, soaring. Still, Friday’s rally sent stocks into the weekend with another weekly gain across the board.

July ➡️ September

June inflation data released last week almost seemed to reinforce the prospects of a Federal Reserve rate cut from September.

A multi-year low in annual inflation and the first monthly decline in headline inflation since 2020 pushed the probability of rate cuts in the fall above 85%. This is evident from data from the CME Group.

In June, headline inflation fell by 0.1% from the previous month and increased by 3% from the previous year. On a core basis, which excludes food and energy costs, consumer prices rose 0.2% from last month and 3.3% from last year.

The Fed targets an inflation rate of 2%.

The June jobs report released earlier this month raised the temperature for the Fed to take action in September. The rise in the unemployment rate to 4.1% indicated that the pace of labor market cooling appears to be accelerating and puts the labor market back under the central bank’s attention after nearly two years of inflation as its main concern.

Fed Chairman Jerome Powell’s appearance on Capitol Hill last week made clear that the central bank’s move this fall will be viewed as a political decision by critics on both sides of the aisle. But the economic basis for an interest rate cut has only become clearer in recent weeks.

“On balance, the economic data are the most supportive of a rate cut they have had all year,” Wells Fargo economists Sarah House and Michael Pugliese wrote in a client note this week.

As Yahoo Finance’s Jared Blikre noted this week, the unemployment rate is now about to trigger the Sahm Rule, which measures the rate of increase in the unemployment rate and has been a leading indicator in each of the last nine U.S. recessions.

On July 31, Powell will hold a news conference after the Fed’s next two-day policy meeting. This event, along with Powell’s speech at the Jackson Hole Economic Symposium in late August, will give the chairman ample opportunity to prime markets for a move in September.

U.S. Federal Reserve Chairman Jerome Powell testifies before Senate hearings on banking, housing and urban matters to examine the semiannual monetary policy report before Congress on Capitol Hill in Washington, DC, on July 9, 2024. (Photo by Chris Kleponis/AFP) (Photo by CHRIS KLEPONIS/AFP via Getty Images) — U.S. Federal Reserve Chairman Jerome Powell testifies before the Senate hearings on banking, housing and urban affairs to examine the semi-annual monetary policy report to Congress on Capitol Hill in Washington, DC, on July 9, 2024. (Photo by CHRIS KLEPONIS/AFP via Getty Images) (CHRIS KLEPONIS via Getty Images)

Weekly calendar

Monday

Economic data: New York Fed Empire State Manufacturing Index, July (-6 expected, -6 earlier)

Income: Goldman Sachs (GS), BlackRock (BLK)

Tuesday

Economic data: Retail sales, June (-0.2% expected, +0.1% prior); Import price index, June (-0.1% expected, -0.4% earlier); Export price index, June (-0.1% expected, -0.6% earlier); Sentiment of NAHB homebuilders, July (43 expected, 43 earlier)

Income: Bank of America (BAC), Morgan Stanley (MS), UnitedHealth (UNH), Charles Schwab (SCHW), Interactive Brokers (IBKR), Progressive (PGR), PNC Financial (PNC), State Street (STT)

Wednesday

Economic data: Start of residential construction, June (+1.8% expected, -5.5% earlier); Construction permits, June (-0.6% expected, -3.8% earlier); Industrial production, June (+0.4% expected, +0.9% earlier); Beige Federal Reserve book

Income: Johnson & Johnson (JNJ), United Airlines (UAL), ASML (ASML), Discover (DFS), US Bancorp (USB), Citizens Financial (CFG), Ally Financial (ALLY), Synchrony (SYF), Alcoa (AA ), Kinder Morgan (KMI), Steel Dynamics (STLD)

Thursday

Economic data: First unemployment claims, July 13 (228,000 expected, 222,000 earlier); Continued unemployment claims (1.852 million previously)

Income: TSMC (TSM), Netflix (NFLX), Domino’s (DPZ), Blackstone (BX), Alaska Air (ALK), Abbott Labs (ABT), Novartis (NVS), Textron (TXT), Cintas (CTAS), Intuitive Surgery (ISRG), PPG (PPG)