Netflix (NFLX) will be the first major technology company to declare quarterly earnings during the current reporting period, with the streaming behemoth slated to do so after the close on Thursday.
With the AI trade still dominating Wall Street, investors will pay particular attention to the earnings of ASML (ASML) and Taiwan Semiconductor Manufacturing Company (TSM), which are scheduled for release on Wednesday and Thursday, respectively.
ASML is the leading manufacturer of lithography machines, which allow companies to imprint their patterns directly into new chips. TSMC is the world’s largest semiconductor maker.
Elsewhere on the earnings calendar, Goldman Sachs (GS), Morgan Stanley (MS), and Bank of America (BAC) will report on Wall Street’s biggest banks, while Dow members Johnson & Johnson (JNJ), American Express (AXP), UnitedHealth (UNH), and Travelers (TRV) are also expected to report.
Politics will likely be a prominent issue for investors, since Donald Trump escaped an assassination attempt at a rally in Pennsylvania on Saturday. Business leaders reacted quickly to the day’s events, condemning political violence and applauding the former president’s “courage under literal fire [Saturday night].”
The Republican National Convention, which will be held this week in Milwaukee, will formally designate Trump as the Republican presidential nominee.
The economic data calendar will be modest, with Tuesday’s retail sales report for June serving as the standout. After May’s unexpected dip in spending, markets and Fed watchers will look for signs of continued deterioration in the US consumer.
Oxford Economics forecasts retail sales to fall 0.4% in June, but this headline drop will be driven by lower gas prices. “We expect a solid 0.3% rise in underlying control group sales, which, with prices declining in June, will translate into a strong rise in real consumption to round out Q2,” according to a note released on Friday.
“The consumer is still in solid shape, underpinned by a labor market that is cooling, not collapsing, and the strong state of household balance sheets.”
Thursday’s inflation news turned markets upside down, with everything that had been working (read: the “Magnificent Seven”) under pressure and what had been left behind, most notably small caps, skyrocketing. Still, Friday’s rise took stocks into the weekend with a weekly gain across the board.
July ➡️ The Federal Reserve is expected to lower interest rates in September, based on June inflation figures released last week.
A multiyear low in annual inflation and the first monthly drop in headline inflation since 2020 increased the probability of rate reduction beginning in the fall to more than 85%, according to CME Group statistics.
In June, headline inflation declined 0.1% from the previous month but increased 3% compared to the preceding year. Consumer prices increased 0.2% from last month and 3.3% from the previous year on a “core” basis, which excludes food and energy costs.
The Fed’s inflation target is 2%.
The jobs report for June, which was issued earlier this month, increased pressure on the Fed to act in September. The increase in the unemployment rate to 4.1% indicated that the pace of cooling in the job market looks to be quickening, refocusing the central bank’s attention on the labor market after nearly two years of prioritizing inflation.
Fed Chair Jerome Powell’s trip on Capitol Hill this week made it obvious that the central bank’s decision this fall will be viewed as political by critics on both sides of the aisle. However, the economic case for a rate drop has become increasingly evident in recent weeks.
“On balance, the economic data are the most supportive of a rate cut that they have been all year,” said Wells Fargo economists Sarah House and Michael Pugliese in a customer note this week.
As Yahoo Finance’s Jared Blikre pointed out this week, the unemployment rate is on the verge of triggering the Sahm Rule, which monitors the rate of increase in the unemployment rate and has been a leading sign in each of the last nine US recessions.
On July 31, Powell will deliver a press conference following the Fed’s next two-day policy meeting. This event, together with Powell’s address at the Jackson Hole Economic Symposium in late August, will provide the chair plenty of time to prepare markets for a move in September.
Weekly calendar
Monday
Economic data: New York Fed Empire State Manufacturing index, July (-6 expected, -6 previously)
Earnings: Goldman Sachs (GS), BlackRock (BLK)
Tuesday
Economic data: Retail sales, June (-0.2% expected, +0.1% previously); Import price index, June (-0.1% expected, -0.4% previously); Export price index, June (-0.1% expected, -0.6% previously); NAHB homebuilder sentiment, July (43 expected, 43 previously)
Earnings: 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: Housing starts, June (+1.8% expected, -5.5% previously); Building permits, June (-0.6% expected, -3.8% previously); Industrial production, June (+0.4% expected, +0.9% previously); Federal Reserve Beige Book
Earnings: 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: Initial jobless claims, July 13 (228,000 expected, 222,000 previously); Continuing jobless claims (1.852 million previously)
Earnings: TSMC (TSM), Netflix (NFLX), Domino’s (DPZ), Blackstone (BX), Alaska Air (ALK), Abbott Labs (ABT), Novartis (NVS), Textron (TXT), Cintas (CTAS), Intuitive Surgical (ISRG), PPG (PPG)
Friday
Economic data: No major economic data set for release.
Earnings: American Express (AXP), Travelers (TRV), Halliburton (HAL), SLB (SLB), Fifth Third (FITB), Regions Financial (RF)
Shayne Heffernan
