This week, the focus will be on earnings and second-quarter GDP data to be released at the end of the week.
So far, more than 20% of the S&P 500’s market cap has reported second-quarter earnings results. “Earnings are beating by 6.8%, with 75% of companies exceeding their bottom-line estimates. This compares to 5.5% and 71% over the past 3 years,” according to Credit Suisse strategist Jonathon Golub.
It’s the busiest week for second-quarter earnings with about 25% of the S&P 500 gearing up to release results. Tech heavyweights Alphabet, Amazon, Facebook, Twitter, Snap and Tesla will drop their reports, as well as Dow components AT&T, Boeing, Caterpillar, 3M, Visa, McDonald’s and Coca-Cola.
Meanwhile, many are expecting growth to have slowed when key GDP data is released on Friday. Given that the highly-anticipated Federal Open Market Committee (FOMC) policy meeting is at the end of the month, the GDP data will likely play a crucial role for the Fed, as it looks to potentially cut rates. Economists expect the U.S. economy to have grown at a 1.8% annualized rate during the second quarter, down from the 3.1% growth rate in the first quarter, according to data compiled by Bloomberg.
“We expect to learn next week that second-quarter GDP growth slowed to only 1.6% annualized, from 3.1% in the first, which should reinforce expectations that the Fed will cut interest rates at the FOMC meeting a week later,” Capital Economics wrote in a note to clients Friday. “Despite the central bank’s ‘data dependent’ mantra, Fed officials have continued to hint that an interest rate cut is coming later this month even though the incoming data have been, on the whole, more positive.”
Though Nomura also sees a bit of deceleration in GDP growth, economist Lewis Alexander predicted a 2.1% growth rate for the second quarter. “Better underlying momentum than we had expected a few months ago. Personal consumption growth likely drove much of the growth in Q2, likely rebounding to 3.8% q-o-q saar after a weak 0.9% gain in Q1. A strong reading should be in line with stronger consumer spending on core items over recent months,” he wrote in a note Friday.
Fed officials will not be making any public comments as the next meeting approaches; however, recent comments from several policymakers have all but guaranteed an interest rate cut. The Fed fund futures are currently predicting a 77% chance of a 25 basis point cut and a 22% chance of a 50 basis point cut at the upcoming meeting.
In Washington, Robert Mueller, former special counsel, will take the hot seat in Capitol Hill. Market watchers will likely be closely monitoring his testimony in front of both the House Judiciary and House Intelligence Committees on Wednesday.
“That testimony probably won’t include any earth-shattering revelations, but it is sure to worsen the already hostile relations between President Donald Trump and House Democrats,” according to Capital Economics.
Tuesday: AutoNation (AN), Biogen (BIIB), Centene (CNC), Coca-Cola (KO), Harley-Davidson (HOG), Hasbro (HAS), JetBlue (JBLU), Kimberly-Clark (KMB), Lockheed Martin (LMT), PulteGroup (PHM), Sherwin-Williams (SHW), United Technologies (UTX) before market open; Chipotle (CMG), Discover Financial (DFS), Snap (SNAP), Texas Instruments (TXN), Visa (V) after market close
Wednesday: Anthem (ANTM), AT&T (T), Boeing (BA), Caterpillar (CAT), Freeport-McMoran (FCX), Norfolk Southern (NSC), Northrop Grumman (NOC), UPS (UPS), V.F. Corp (VFC) before market open; Deutsche Bank (DB), Facebook (FB), Ford (F), GlaxoSmithKline (GSK), Las Vegas Sands (LVS), O’Reilly (OLRY), PayPal (PYPL), Spirit Airlines (SAVE), Tesla (TSLA), Xilinx (XLNX) after market close
Thursday: 3M (MMM), Anheuser-Busch InBev (BUD), Astrazeneca (AZN), Bristol-Myers Squibb (BMY), Comcast (CMCSA), Hershey (HSY), Raytheon (RTN), Southwest Airlines (LUV), World Wrestling Entertainment (WWE) before market open; Alaska Air (ALK), Alphabet (GOOGL), Amazon (AMZN), BJ’s Restaurants (BJRI), Boston Beer (SAM), Expedia (EXPE), Mattel (MAT), MGM Resorts (MGM), Starbucks (SBUX) after market close
Monday: Chicago Fed National Activity Index, June (0.10 expected, -0.05 prior)
Tuesday: FHFA House Price Index month-on-month, May (0.3% expected, 0.4% prior); Richmond Fed Manufacturing Index, July (5 expected, 5 prior); Existing Home Sales, June (5.34 million expected, 5.34 million prior)
Wednesday: MBA Mortgage Applications, week ended July 19 (-1.1% prior); Markit U.S. Manufacturing PMI, July (51.0 expected, 50.6 prior); Markit U.S. Services PMI, July (51.8 expected, 51.5 prior); Markit U.S. Composite PMI, July (51.5 prior); New Home Sales, June (658,000 expected, 626,000 prior)
Thursday: Wholesale Inventories month-on-month, June (0.4% expected, 0.4% prior); Durable Goods Orders, June (0.7% expected, -1.3% prior); Durable Goods Orders excluding Transportation, June (0.2% expected, 0.4% prior); Initial Jobless Claims, weekend ended July 20 (217,000 expected, 216,000 prior); Continuing Claims, week ended July 13 (1.686 million prior); Bloomberg Consumer Comfort, week ended July 21 (64.7 prior)
Friday: GDP, Q2 (1.8% expected, 3.1% prior); Personal Consumption, Q2 (4.0% expected, 0.9% prior); GDP Price Index, Q2 (1.9% expected, 0.9% prior); Core PCE quarter-on-quarter, Q2 (2.0% expected, 1.2% prior)
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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