The Dow and small-cap Russell 2000 were the biggest winners as the rotation from market darlings to down-and-out names continued. In terms of sectors, the S&P 500 health care index led the upside, followed by materials and utilities. On the downside, communication services, consumer discretionary, and information technology struggled. Economic data including a stronger-than-expected read on second-quarter U.S. economic growth and a largely inline June personal consumption expenditures price index helped bolster the case for three central bank interest rate cuts, starting in September. Weakness in housing data also supported the case for rate cuts.
In terms of earnings, positive results were seen from companies like Danaher and Dover, while Ford saw a major disappointment with a nearly 20% stock drop for the week. Alphabet and Honeywell were net positive, despite post-earnings sell-offs. As of now, 41% of the S&P 500 has reported earnings, with 78% exceeding earnings expectations and 60% reporting better-than-expected revenue. Looking ahead, more Club names are set to report earnings, including Procter & Gamble, Stanley Black & Decker, Advanced Micro Devices, Microsoft, Starbucks, GE Healthcare, DuPont, Meta Platforms, and others. The focus will be on various aspects of their business performance and outlooks.
In terms of the economy, upcoming major economic reports include the July employment report, July ADP survey of U.S. company hiring, and the June Job Openings and Labor Turnover Survey. Friday’s government jobs numbers are expected to carry the most weight, providing insight into nonfarm payroll additions, the nation’s unemployment rate, wage inflation, and more. The July Fed meeting is also set to conclude, with expectations that while no cut will occur this time, the path to a cut in September will likely be highlighted. Overall, the focus will continue to be on both economic data and corporate earnings as investors navigate market conditions.
In terms of upcoming earnings, Procter & Gamble will be focused on providing better value through innovation and maintaining market share and volume growth. Stanley Black & Decker will highlight the turnaround underway and management’s commentary on demand against the prospect of lower Fed interest rates. Advanced Micro Devices will focus on demand for artificial intelligence accelerator chips and updates on the PC refresh cycle. Microsoft will emphasize Azure cloud growth and AI investments. Starbucks will look for signs of traffic stabilization. GE HealthCare will focus on order rates, margin expansion, and other key metrics.
Looking at the week ahead, there are several major economic reports to watch, including the July employment report, ADP survey, and JOLTS. The July Fed meeting is also set to conclude, with expectations for a cut in September. Furthermore, a lineup of major companies is set to report earnings, with a focus on various aspects of their business performance and outlooks. Investors will need to carefully monitor both economic data and corporate earnings to make informed decisions in the current market environment.
