Rosalind Evans
The S&P 500 climbed 0.3% by midday trading, seemingly set for another uneventful day following a sluggish Monday. As of 11 a.m. Eastern time, the Dow Jones Industrial Average increased by 141 points, or 0.4%, to 34,085, while the Nasdaq composite advanced by 0.2%.
Salesforce contributed positively to the indices, witnessing a 3.3% rise after announcing a 9% average increase in product list prices. Amazon also had a bullish impact on the market, gaining 1.2% on the inaugural day of its annual Prime Day sales event. Activision Blizzard escalated 5% after a judge decided not to halt Microsoft’s $69 billion acquisition of the video game manufacturer.
The week’s highlight is expected on Wednesday when the latest consumer-level inflation update from the U.S. government is released. Economists predict a further deceleration, with June’s prices being 3.1% higher than last year, a decline from May’s 4% inflation and just over last summer’s 9%.
Wall Street’s anticipation revolves around continued inflation reduction prompting the Federal Reserve to halt interest rate hikes soon. High rates have contributed to lowering inflation and created instability in the banking, manufacturing, and other sectors while driving down stock prices and other investments.
Later in the week, corporations will disclose their spring earnings, and the outlook appears bleak mainly. Analysts predict the steepest plunge in earnings per share for S&P 500 companies since the pandemic severely impacted the global economy in the spring of 2020.
According to Bank of America strategists, this forthcoming reporting season could denote the nadir for corporate profit downturns. They highlight the economy’s resilient trends, and many companies provide more optimistic forecasts for future results than analysts’ predictions.
Strategists, including Ohsung Kwon, anticipate a more optimistic tone from companies in their BofA Global Research report. “Companies are likely to underscore improvements in business conditions and momentum building throughout the quarter and into July,” they wrote.
Due to the low spring expectations for companies, they might just edge past without any remarkable feats.
WD-40 surged 19.4% after reporting a revenue growth rebound in the three months through May following two consecutive quarters of stagnant or declining sales. It posted more robust profit and revenue growth than anticipated, maintaining its full-year sales and profit projections.
Several cruise operators, however, languished, losing momentum after a blistering start to the year. Carnival dropped 2.3%, and Royal Caribbean decreased 2.2%. Yet, both have seen more than a 100% increase this year.
Bank of America experienced mixed fortunes as it was instructed by regulators to refund $100 million to customers. Despite allegations of double-dipping on fees, withholding credit card rewards, and opening accounts without customers’ consent, it saw a 0.7% increase.
In the bond market, Treasury yields remained relatively constant following last week’s rise with the anticipation that the Fed will persist with higher interest rates to tame inflation.
The 10-year Treasury yield slightly decreased to 3.98% from 4.00% late Monday, influencing mortgage and other loan rates.
The two-year Treasury yield, more responsive to Fed expectations, increased to 4.88% from 4.86%.
Overseas markets mainly reported an uptick in stock indexes. Hong Kong’s Hang Seng increased 1%, South Korea’s Kospi jumped 1.7%, and France’s CAC 40 gained 1%.
London’s stocks declined by 0.1% following a report revealing record U.K. wage increases in the face of stubbornly high inflation. This strengthens expectations of the central bank continuing to raise interest rates.
As we approach mid-July, markets worldwide reflect a cautious optimism. Investors are looking closely at inflation figures, corporate earnings, and central bank policies, all while weighing the potential impact of these variables on their portfolios. This week’s unfolding narratives in the U.S., Europe, and Asia, along with the performance of individual companies, offer valuable insight into global financial trends. Investors should consider these trends carefully when shaping their investment strategies.
