Wall Street’s busiest week of the summer sent stocks lower as a weak July jobs report raised concerns about the health of the US economy and Big Tech earnings failed to ease investor fears .
For the week, the S&P 500 (^GSPC) fell more than 2.5%, while the Nasdaq Composite (^IXIC) fell more than 3.7%. This move on the Nasdaq sent the index into a correction after closing more than 10% from its latest high reached on July 10. Meanwhile, the Dow Jones Industrial Average (DJI) is it is also down about 2.5%.
Next week will provide no fresh macroeconomic fodder for investors, with updates on services sector activity and weekly jobless claims expected to be the in the article released.
On the business side, earnings from Airbnb ( ABNB ), SuperMicro Computer ( SMCI ), Disney ( DIS ), and Eli Lily ( LLY ) highlighted another busy week of quarterly updates.
A deep cut
After months of speculation about when the Federal Reserve will cut interest rates, the market seems to have reached a consensus – the Federal Reserve will cut interest rates next month.
The latest round of softer-than-expected economic data now has investors wondering how big the cut will be.
A series of weaker-than-expected economic data, highlighted by a July jobs report that sparked a closely watched recession, fueled speculation that the Fed’s policy rate may be very difficult.
“Even if labor market conditions continue to moderate from here on out, it would appear that the Fed has at least 100bp, possibly more,” JPMorgan’s U.S. economist Michael Feroli wrote in a note. go to customers on Friday. “So now we think the FOMC cuts 50bp at the September and November meetings, followed by a 25bp cut at each meeting after that.”
During his recent press conference, Fed Chairman Jerome Powell declined to say when the Fed plans to cut rates but noted that “September is on the table.”
This confirmed the market’s bias going into the meeting that the policy will come at the end of the summer. With the September rate cut completely, the new market debate has turned to how much the Fed will cut and what factors will drive the change.
Feroli added that, from a risk management perspective, there is a strong case for the Fed to cut before its September meeting.
But, he wrote, “Perhaps Powell doesn’t want to add more noise to what has already been an eventful summer.”
As of Friday afternoon, markets were pricing in about a 70% chance the Fed would cut rates by 50 basis points, up from a 12% chance last week, according to the CME FedWatch Tool.
The change is likely to set the tone for what will come from Federal Reserve officials in particular. Federal Reserve officials Austan Goolsbee, Mary Daly, and Tom Barkin are scheduled to appear publicly next week.
Disney continues
Disney will talk about its quarterly earnings week when it reports earnings on Wednesday morning.
The focus is on Bob Iger’s turnaround strategy for the entertainment giant as the company increases its commitment to expensive sports rights.
The NBA recently secured a media rights package worth $77 billion over 11 years with new partners that include tech giant Amazon ( AMZN ) and Comcast’s NBCUniversal ( CMCSA ), as well as Disney.
“We think that the attention of investors will be on Disney + and what progress the management has made in driving technology, which focuses on capturing the chaos of consumers and enjoying the user experience,” the analyst of CFRA Ken Leon wrote in a letter reviewing the release. “The fastest way to big profits can be profits for the direct-to-consumer segment.”
Leon added, “Sports rights and a strong offer to broadcast the NBA should be announced on the pay line.”
Earnings scorecard
While changes in macroeconomic data took center stage and weighed on markets last week, the S&P 500 as a whole posted its best quarterly gain in nearly three years.
With 75% of the S&P 500 reporting results, the index is on pace for annual growth of 11.5%, according to FactSet senior earnings analyst John Butters.
This will mark the annual income growth rate recorded by the index from the fourth quarter of 2021.
Looking ahead, analysts cut their third-quarter earnings estimates by 1.8% in the first quarter, in line with the overall decline seen over the past 20 years.
Weekly calendar
Monday
Economic facts: S&P Global US Services PMI, end July (56 expected, 56 earlier); S&P Global US Composite PMI, end of July (55 before); ISM Services index (51.3 expected, 48.8 earlier)
Salary: Avis Budget Group (CAR), Clover (CLOV), Hims & Hers Health (HIMS), Lucid (LCID), Palantir (PLTR), Simon Property Group (SPG), Tyson (TSN)
Tuesday
Economic facts: Trade balance, June (-$72.6 billion expected, $75.1 billion first)
Salary: Airbnb (ABNB), Amgen (AMGN), Caterpillar (CAT), Celsius Holdings (CELH), Constellation Energy (CEG), Devon Energy (DVN), Reddit (RDDT), Rivian (RIVN), Super Micro Computer (SMCI), Uber (UBER), Wynn Resorts (WYNN)
Wednesday
Economic facts: MBA Mortgage Applications, week ending Aug. 2 (-3.9% before); Consumer Credit, June ($10.30 billion, $11.35 billion previously)
Salary: CVS Health (CVS), Disney (DIS), Dutch Bros (BROS), Lyft (LYFT), Novo Nordisk (NVO), Occidental Petroleum (OXY), Robinhood (HOOD), Shopify (SHOP), Sony (SONY)
Thursday
Economic facts: Initial jobless claims, week ending Aug. 3 (249,000 earlier); Continuing reports, week ending July 27 (1.87 million earlier); Monthly retail documents, end of June (+0.2% expected, +0.2% earlier)
Salary: Datadog (DDOG), elf Beauty (ELF), Eli Lily (LLY), Novavax (NVAX), Paramount (PARA), Plug Power (PLUG), SoundHound (SOUN), The Trade Desk (TTD)
Friday
Economic facts: There are no notable economic releases.
Salary: Canopy Growth (CGC), Nikola (NKLA)
Josh Schafer is a reporter for Yahoo Finance. Follow him to X @_joshschafer.
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