Stocks fell from record highs on Friday as a global tech outage sent shockwaves through markets, putting pressure on the entire technology sector.
S&P 500 (^GSPC) fell about 2% over the weekend, while the Nasdaq Composite Index (^IXIC) fell more than 3.5% for the week. Both indexes posted their worst weekly performances since April. Meanwhile, the Dow Jones Industrial Average (^DJI) rose about 0.7%.
This week, key indicators of economic growth and inflation, as well as earnings reports from major technology companies, will determine whether the recession will last.
On the economic data front, preliminary second-quarter economic growth figures are due to be released on Thursday, followed by June personal consumption expenditures, the Fed’s go-to inflation gauge, on Friday.
In corporate news, Alphabet (Google, Google), Tesla (TSLA),chipotle pepper(CMGB).
Inflation outlook
last week, New data points to slowdownn in inflation Inspired Market We assume a 100% chance that the Federal Reserve will cut interest rates by the end of its September meeting.
We will reexamine inflation next week, this time using the Fed’s preferred measure, the personal consumption expenditures (PCE) index.
Economists expect “core” PCE, due to be released on Friday, to grow 2.5% year-on-year in June, down from 2.6% in May. Month-on-month, economists expect “core” PCE to grow 0.2%, slightly faster than May’s 0.1% increase.
The announcement came less than a week before the Fed’s next monetary policy decision, scheduled for July 31, which is widely expected in the market to keep interest rates on hold.
Growth Check
One of the key questions investors are asking is whether the economy can remain resilient with interest rates at their tightest levels in more than two decades.
The first second-quarter gross domestic product figures are due on Thursday. Economists expect the U.S. economy to grow at an annualized rate of 1.9% in the second quarter, up from 1.4% in the first quarter.
“The data should show healthy activity and suggest that inflation is heading in the right direction,” Michael Gapen, head of economics at Bank of America Securities, wrote in a weekly note summarizing expectations for the data due next week.
Signs of rotation
As investors become more optimistic about the possibility of multiple rate cuts this year, shift It’s happening within the stock market.
In the past 10 days, real estate (XLRE) and Finance (XLF) led the sectors. Meanwhile, the biggest winners over the past year were technology (XLK) and communication services (XLLC) has been the worst-performing sector of the S&P 500 recently.
And this rotation will eventually spill over into market capitalization, allowing small-cap stocks to join the stock market rally in 2024.
Small Cap Russell 2000 (^RUT) is up about 8% over the past month, while the S&P 500 is up less than 1% in the same period. spark debate The focus is on whether the strong performance of small-cap stocks will continue.
“If rate cuts remain priced in and the Trump 2.0 trade continues ahead of the U.S. presidential election, we think there is room for a continued rotation into lower quality names,” Maxwell Grinacoff, U.S. equity derivatives strategist at UBS Investment Bank, wrote in a client note on Thursday.
Big tech companies are expected to make gains
The fundamentals of some of the stock market’s biggest names will be in focus over the coming week as big technology companies stumble amid a market rotation.
Tesla and Alphabet are scheduled to report earnings after the close of trading on Tuesday, and second-quarter results from the two members of the Magnificent Seven will provide an early read on investor interest in the hottest deals of 2023. Both stocks have posted double-digit gains over the past six months despite recent sell-offs.
The question is whether AI’s upward trajectory can continue.
“The biggest risk over the next six to eight weeks is whether we end up facing a disappointment from AI. [in earnings]”Will all of these AI-related deals eventually start to unwind?” Ryan Grabinski, managing director of investment strategy at Strategas Research Partners, told Yahoo Finance.
The performance of big technology companies will likely determine the trajectory of revenue growth across the S&P 500.NVDA), Meta (Meta), Amazon (AmazonAccording to John Butters, senior earnings analyst at FactSet, 496 U.S. companies are expected to see revenue growth of 56.4% in the third quarter of 2017 compared to the same period last year. The remaining 496 companies are expected to see revenue growth of just 5.7%.
Combining the two groups, the S&P is currently on pace to achieve 9.7% year-over-year earnings growth, which would be its best quarter of earnings growth since the fourth quarter of 2021.
Weekly Calendar
Monday
Economic data: Chicago Fed National Activity Index, June (Expected -0.06, Previous +0.18)
Revenue: Cleveland Cliffs (CLF), Nucore (Nue), SAP (Financial Statements), Truist (TFC), Verizon (VZ), Zions Bancorporation (Zion)
Tuesday
Economic data: Richmond Fed Manufacturing Index, July (-7 expected, -10 previous); Existing Home Sales m/m, June (-2.7% expected, -0.7% previous)
Revenue: alphabet (Google, Google), Cal-Maine Foods (Calm), Capital One (Corfu), Comcast (CMCSA), Enphase (Enfu), Freeport-McMoRan (FCCX), GE Aerospace (GE), General Motors (GM), Lockheed Martin (Light MT), Philip Morris International (afternoon), Spotify (spot), Tesla (TSLA), UPS (UPS), Texas Instruments (TXN),visa(Five)
Wednesday
Economic data: MBA Mortgage Applications, week ending July 19 (previous +3.9%); S&P Global US Manufacturing PMI, July, preliminary (expected 51.4, previous 51.6); S&P Global US Services PMI, July, preliminary (expected 55, previous 55.3); S&P Global US Composite PMI, July, preliminary (previous 54.8); New Home Sales, m/m, June (expected +3.8%, previous -11.3%)
Revenue: AT&T (T),chipotle pepper(CMGB), Ford (debt), IBM (IBM), General Dynamics (Good Day), Lamb Weston (Light), Las Vegas Sands (LVS), ServiceNow (now), Viking Therapeutics (movie), waste management (Wim), Whirlpool (WHR)
Thursday
Economic data: Preliminary second quarter GDP (expected +1.9% annualized rate, previous +1.4%). Preliminary first quarter personal consumption (expected +1.7% annualized rate, previous +1.5%). Initial jobless claims for the week ending July 20 (previous 243,000). Preliminary June durable goods (expected +0.5% annualized rate, previous +0.1%).
Revenue: American Airlines (Arabic), AstraZeneca (Azun), Boston Beer (Sam), Deckers (deck), Hasbro (Have), Honeywell (Hon), Juniper Networks (Press), Keurig Dr. Pepper (giraffe), New York Community Bancorp (New York City Council), RTX (RTTX 10.0), Skechers (SKX), Southwest (i love you), Texas Roadhouse (TXRH), Valero (Volo)
Friday
Economic data: Personal Income MoM June (Est +0.4%, Previous +0.5%); Personal Spending MoM June (Est +0.3%, Previous +0.2%); PCE Inflation MoM June (Est +0.1%, Previous 0%); PCE Inflation YoY June (Est +2.5%, Previous +2.6%); “Core” PCE MoM June (Est +0.2%, Previous +0.1%); “Core” PCE YoY June (Est +2.5%, Previous +2.6%); University of Michigan Consumer Sentiment July final (Est 66.3, Previous 66)
Revenue: 3M (Hmm), Bristol-Myers Squibb (Be Me), Colgate-Palmolive (CL), Charter Communications (Chinese)
Josh Shaffer is a reporter for Yahoo Finance. Follow him on X Follow.
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