In the coming week, more than 150 S&P 500 businesses, including Microsoft (MSFT), Alphabet (GOOGL), and Meta (META), will release their quarterly results. The Federal Reserve will make its most recent policy announcement on Wednesday afternoon amid this earnings frenzy and is anticipated to declare a further hike in its benchmark interest rate of 0.25%.
Investors will also be kept busy by the economic calendar, which includes the first estimate of second-quarter GDP, two assessments of consumer confidence, inflation data, and a preliminary assessment of factory activity in July.
This news blitz comes after a week in which the Dow Jones Industrial Average (DJI) assumed a commanding position in the market, gaining 2.1% over the course of the week, with the Blue Chip index ending Friday with its eleventh consecutive positive session. The Nasdaq Composite (IXIC), on the other hand, was the week’s underperformer, down 0.6%.The benchmark S&P 500 gained 0.7%, bridging the gap.
Results from Tesla (TSLA) and Netflix (NFLX), two of this year’s tech high flyers, caused investors to reduce their holdings, dragging down the Nasdaq. The main themes for investors this week will be if this pattern holds true during earnings season.
End Of Fed Rate Increases?
On Wednesday at 2:00 PM ET, the US central bank will publish its most recent monetary policy decision. A news conference by Fed Chair Jay Powell is scheduled for 30 minutes later.
According to CME Group data released on Friday, markets are currently pricing in a 99.8% possibility that the Fed would increase its benchmark interest rate target range by an additional 0.25% to 5.25%-5.5%. The fed funds rate would reach its highest level since 2001 as a result.
Disinflation Will Continue
In a note published on July 19, Bank of America economist Michael Gapen stated, “We look for the Fed to raise the target range for the Federal funds rate by 25bp to 5.25-5.50% after remaining on hold at its June FOMC meeting.” “The economy is only slowly cooling, and we believe the majority of the committee members believe further supply and demand rebalancing is necessary to ensure disinflation will continue.”
The senior US economist at Morgan Stanley, Ellen Zentner, wrote in a note on Thursday, “We look for Chair Powell to provide more clarity in the press conference on what markers the Committee would need to see to be comfortable moving into an extended hold.” For instance, Governor Waller stated that the statistics would signal a possible halt if the following two readings of core inflation “look like the last two.” A similar warning from Powell would lead us to believe that we are in for a protracted hold.