Earnings Season Commences
The second-quarter earnings season is set to kick off, bringing a wave of financial reports. Tesla, a prominent growth and technology company, is scheduled to release its results on Wednesday, marking the beginning of the earnings announcements for the influential "Magnificent Seven" stocks. These include Apple, Microsoft, Alphabet, Amazon, Nvidia, and Meta Platforms, which have significantly contributed to the S&P 500's rally with their impressive stock gains ranging from 40% to over 200% this year. While the market rally has shown signs of broadening to other sectors, a disappointing performance by any of these megacaps in the current quarter could have a substantial impact on equity indexes.
Several other major companies will also be reporting their earnings in the upcoming week, including Bank of America, Goldman Sachs, Johnson & Johnson, Netflix, and Philip Morris.
U.S. Economic Data
Investors will be monitoring key U.S. economic data releases. Retail sales data for June, expected on Tuesday, is anticipated to show a 0.5% increase, supported by the recovery in auto sales and higher gasoline station sales, reflecting resilient consumer demand. Reports on building permits, housing starts, and existing home sales will provide insights into the housing sector's health. While existing home sales continue to be affected by high mortgage rates, construction activity is improving due to stable pricing and increased demand for new homes resulting from limited property availability. Additionally, there will be updates on regional manufacturing activity and weekly data on initial jobless claims.
China Economic Data
China is expected to release a series of economic data on Monday, indicating that its post-pandemic rebound is losing momentum. Gross domestic product (GDP) for the second quarter is projected to grow at an annualized rate of 7.3%, compared to 4.5% in the previous quarter. However, this reading will be influenced by the significant decline in economic activity during the spring, when widespread lockdown measures were in place. The mounting deflationary pressure and trade slump have raised concerns about the outlook for the world's second-largest economy, which previously showed signs of a robust recovery.
U.K. Inflation
On Wednesday, the U.K. is scheduled to release inflation data for June, which will likely have implications for the Bank of England's (BoE) future interest rate decisions. The headline consumer price index is expected to ease to 8.2% year-over-year from 8.7% in May, primarily driven by lower food and fuel prices. Core inflation is also anticipated to decrease, while the services component is expected to remain steady at a post-COVID high of 7.4%. In its June meeting minutes, the BoE stated that further tightening might be necessary if persistent inflationary pressures, including in services CPI, were observed in the economy. The upcoming August meeting could be a close call, with a rise in services CPI potentially solidifying expectations for a 50-basis point rate hike, while a lower reading could favor a smaller 25 bps increase.
Oil Prices
Following three consecutive weekly gains, oil prices are likely to continue their upward trajectory in the coming week. Factors such as easing inflation, plans to refill the U.S. strategic reserve, supply cuts, and ongoing disruptions are supporting prices. Although oil prices may be slightly overbought in the short term, reaching levels not seen since early May, the overall sentiment suggests a potential for further gradual gains. Recent supply disruptions in Libya and Nigeria have raised concerns about tightening market conditions in the coming months. However, on Friday, oil prices experienced a decline of over a dollar per barrel due to a strengthening dollar and profit-taking by oil traders following a strong rally.
The second-quarter earnings season is set to kick off, bringing a wave of financial reports. Tesla, a prominent growth and technology company, is scheduled to release its results on Wednesday, marking the beginning of the earnings announcements for the influential "Magnificent Seven" stocks. These include Apple, Microsoft, Alphabet, Amazon, Nvidia, and Meta Platforms, which have significantly contributed to the S&P 500's rally with their impressive stock gains ranging from 40% to over 200% this year. While the market rally has shown signs of broadening to other sectors, a disappointing performance by any of these megacaps in the current quarter could have a substantial impact on equity indexes.
Several other major companies will also be reporting their earnings in the upcoming week, including Bank of America, Goldman Sachs, Johnson & Johnson, Netflix, and Philip Morris.
U.S. Economic Data
Investors will be monitoring key U.S. economic data releases. Retail sales data for June, expected on Tuesday, is anticipated to show a 0.5% increase, supported by the recovery in auto sales and higher gasoline station sales, reflecting resilient consumer demand. Reports on building permits, housing starts, and existing home sales will provide insights into the housing sector's health. While existing home sales continue to be affected by high mortgage rates, construction activity is improving due to stable pricing and increased demand for new homes resulting from limited property availability. Additionally, there will be updates on regional manufacturing activity and weekly data on initial jobless claims.
China Economic Data
China is expected to release a series of economic data on Monday, indicating that its post-pandemic rebound is losing momentum. Gross domestic product (GDP) for the second quarter is projected to grow at an annualized rate of 7.3%, compared to 4.5% in the previous quarter. However, this reading will be influenced by the significant decline in economic activity during the spring, when widespread lockdown measures were in place. The mounting deflationary pressure and trade slump have raised concerns about the outlook for the world's second-largest economy, which previously showed signs of a robust recovery.
U.K. Inflation
On Wednesday, the U.K. is scheduled to release inflation data for June, which will likely have implications for the Bank of England's (BoE) future interest rate decisions. The headline consumer price index is expected to ease to 8.2% year-over-year from 8.7% in May, primarily driven by lower food and fuel prices. Core inflation is also anticipated to decrease, while the services component is expected to remain steady at a post-COVID high of 7.4%. In its June meeting minutes, the BoE stated that further tightening might be necessary if persistent inflationary pressures, including in services CPI, were observed in the economy. The upcoming August meeting could be a close call, with a rise in services CPI potentially solidifying expectations for a 50-basis point rate hike, while a lower reading could favor a smaller 25 bps increase.
Oil Prices
Following three consecutive weekly gains, oil prices are likely to continue their upward trajectory in the coming week. Factors such as easing inflation, plans to refill the U.S. strategic reserve, supply cuts, and ongoing disruptions are supporting prices. Although oil prices may be slightly overbought in the short term, reaching levels not seen since early May, the overall sentiment suggests a potential for further gradual gains. Recent supply disruptions in Libya and Nigeria have raised concerns about tightening market conditions in the coming months. However, on Friday, oil prices experienced a decline of over a dollar per barrel due to a strengthening dollar and profit-taking by oil traders following a strong rally.