What to expect in the markets this week

Stock markets rose on Friday and the Standard & Poor’s 500 Index hit another record high, as tech stocks rallied ahead of some big earnings news next week. The three key indices all won, outpacing growing concerns about the increase in COVID-19 variant cases in the country and how that may affect progress in economic growth. Those gains came after starting the week in the red, after the Dow fainted more than 700 points on Monday.

Equity investors returned to the market to close out the week; the Dow Jones Industrial Average rose 238 points, or 0.68%, to 35,062.41, while the S&P 500 and Nasdaq Composite rose 1% each, sending all major averages to new records.

Looking ahead to next week, investors will be looking for clues from the latest earnings reports from major US tech companies including Tesla, Google and Microsoft as they track news of the delta variant of COVID-19 and how that may affect return to work for many companies this fall.

Key takeaways

  • Next week is a big week for earnings, starting with the Tesla reports on Monday.
  • Big Tech reports Tuesday through Thursday with all the big names from Google, Microsoft, Apple, Facebook, and Amazon reporting quarterly earnings.
  • The US Federal Open Market Committee will hold its press conference on interest rates and monetary policy; Markets are on the lookout for news of a future phasing out of bond purchases.

Here are the returns for the major asset classes and Bitcoin, so far this year.

Events calendar:

Monday July 26:

  • Tesla Inc. (TSLA) reports earnings
  • German Ifo Business Climate Index (July).
  • New Home Sales in the US (June).

Tuesday July 27:

  • Alphabet Inc. (GOOGL), GE Corp. (GE), Microsoft Inc. (MSFT), Apple Inc. (AAPL) and AMD Inc. (AMD) report earnings.
  • Basic U.S. Durable Goods Orders
  • Composite of the US S & P / CS Home Price Index (May).
  • US Conference Board Consumer Confidence (July)

Wednesday July 28:

  • Facebook Inc. (FB), Boeing Inc. (BA), Ford Motor Company (F) and Pfizer Inc. (PFE) report earnings.
  • Interest rate decision and monetary policy statement of the US Federal Open Market Committee (FOMC).
  • Canadian Consumer Price Index (CPI) (June).
  • US Retail Inventories Ex-Auto (June).
  • US Goods Trade Balance (June).
  • GfK German Consumer Climate (August).

Thursday July 29:

  • Amazon Inc. (AMZN) reports earnings.
  • German unemployment rate (July).
  • Pending US Home Sales (June).
  • Japanese retailer (June).

Friday July 30:

  • ExxonMobil Corp. (XOM) reports quarterly earnings.
  • French consumer spending (June).
  • French gross domestic product (GDP) (second quarter).
  • UK House Price Index (HPI) (July).
  • German GDP (second quarter)
  • Euro zone unemployment rate (June).
  • US Personal Consumption Basic Expenditure (PCE) (June)
  • Chicago Purchasing Managers Index (PMI) from USA (June).
  • Expectations and Consumer Sentiment from US University of Michigan (July)
  • China Composite and Manufacturing PMI (July).

Events next week

This coming week is packed with earnings as top companies from all sectors of the economy report quarterly earnings. Electric carmaker Tesla reports earnings when markets close on Monday. One thing to watch out for is the considerable reminders Tesla had to start towards the end of last quarter, and it’s unclear exactly how much that may affect its bottom line.

The biggest news will likely be the Five Tech Titans, reporting next week. Alphabet, Microsoft and Apple will report on Tuesday, Facebook will report on Wednesday and Amazon will report on Thursday. There are two important issues that investors should keep in mind when considering these companies.

The first is fierce competition in the cloud computing market where Amazon (with AWS), Google (with Google Cloud) and Microsoft (with Azure) compete for the same lucrative and fast-growing market. Because this area makes up a disproportionate section of profit and revenue growth across all of these companies, it’s important to be vigilant to see which company grows your business the fastest.

The second is the growing number of antitrust problems that all of these companies have. Especially with the appointment of the new chairman of the Federal Trade Commission (FTC), Lina Khan, a much tougher figure in antitrust than anyone who has held that position for some time, this topic will likely be the subject of considerable discussion in the earnings calls. To get an idea of ​​how seriously these companies take it, both Facebook and Amazon have asked you to refrain from the FTC investigations related to them because your past criticisms were too harsh. The growing number of lawsuits and the movement of six major antitrust bills in Congress are also important topics that can be important talking points during calls.

FOMC meeting

The US Federal Open Market Committee announces decisions on interest rates and monetary policy this Thursday. Nobody expects interest rates to change, but the big buzz is what we will hear about whether or not the Fed will lower the rate at which it is buying bonds, a process called “tapering.” This means that you will adopt a less accommodating monetary policy and will inject less money into the economy. On the one hand, the Fed’s main measure of inflation, the core Personal Consumption Expenditure (PCE) index (minus food and fuel), has been significantly above its preferred target of 2% for the last two months of the year. we have data, reaching 3.1% and 3.4% in April and May, respectively. Typically, when inflation moves above the Fed threshold, the Fed tightens monetary policy.

However, the Federal Reserve also changed its policy in August 2020. Because inflation had been below its 2% threshold for years, the Fed said it would target a rate somewhat above 2% to balance the rates. stuff. Between this fact and the fact that Fed Chairman Jerome Powell believes that current inflation is largely due to shortages caused by the reopening of the economy, many other people believe that we will still not see a gradual reduction in shopping.

The Fed has mentioned that it will give substantial advance notice of any downsizing, likely to avoid a repeat of the “taper tantrum” of 2013, when Treasury yields temporarily spiked due to a downsizing announcement. So keep in mind that any announcement of a possible phase-down is likely to not go live for some time yet.


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Mark Holland

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