Wall Street Inches Up: A Hopeful Landing amid Quarterly Earnings and Jobs Report

As we move into the final day of July it is reassuring seeing the economy remain sturdy even in these volatile times. How are investors navigating?

Wall Street has shown signs of a slight ascent, with key benchmarks primed to close July on a more hopeful note. This positive trend is the result of encouraging company earnings and the prospect of a soft landing for the resilient U.S. economy. Cooling inflation also supports bets on a rate-hike pause, further strengthening the prospects of a healthier market landscape.

Investors have been eagerly anticipating quarterly reports from giants like Apple, Amazon, and AMD, due this week. These reports will provide key indicators of the tech industry's performance and overall market health. Additionally, the July ISM Manufacturing reading and three sets of employment data, including July's non-farm payrolls, will offer further insight into the economy's strength.

Despite some hiccups, second-quarter earnings for S&P 500 companies have shown improvement. Current estimates suggest a 6.4% year-over-year decline, a notable improvement from the 7.9% drop projected just a week earlier. As Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, explains, "investors are taking a little bit of a pause." The marketplace is waiting with bated breath for news from Amazon and Apple, hoping for positive results similar to those seen from Meta and Google.

Last week, the tech-heavy Nasdaq led Wall Street higher, thanks to strong quarterly earnings from mega-cap growth companies such as Alphabet, Meta Platforms, and chipmakers Intel and Lam Research. Citigroup, banking on the potential of a soft landing, raised its 2023-end and mid-2024 S&P 500 targets to 4,600 and 5,000, respectively. The benchmark index is a mere 4.8% away from its all-time intraday high hit earlier this year and looks set to see gains for the fifth consecutive month.

Regarding the question of inflation and the potential for a recession, Austan Goolsbee, Chicago Fed President, believes the central bank is "walking the line pretty well." The central bank will closely monitor incoming data to decide if further monetary tightening is required in September.

Investors have much to ponder in the realm of tech and innovation. They are eagerly awaiting Apple's commentary on its Vision Pro headset, a product that could redefine the tech landscape. Similarly, any insights into the growth and direction of Facebook parent company Meta's cloud business will provide key industry indicators.

As July draws to a close, Wall Street veteran Michael Wilson suggests that the current rally in U.S. equities is reminiscent of 2019, a year remembered for one of the best returns on the S&P 500. The data, he claims, indicates that we're witnessing a "policy-driven, late-cycle rally," similar to what was seen in 2019 when the central bank paused rate hikes, cut rates, and significantly expanded its balance sheet by year-end.

The resilience of the U.S. economy and the ability to weather potential recession chatter bolsters the current optimism in the market. With the Federal Reserve expected to pause further rate hikes, the market's enthusiasm for a so-called soft landing has surged. While the S&P 500 has gained 19% this year, mirroring the 2019 trend, it's important to note that the market multiple is already nearing 1 turn higher than where it peaked during that period.

Investors' eyes remain on tech earnings and the forthcoming jobs report, especially as stocks started higher but showed minimal change on Monday. Reports from Apple and Amazon will take center stage this Thursday, with the July jobs report due Friday morning.

In other news, Adobe, Walmart, and Yellow Corp. have been creating a stir in premarket trading. While shares of Heineken and Yellow Corporation have dipped, Walmart and Adobe have seen promising growth.

As we move toward the final day of July, stock futures have shown little change, and investors are bracing for a busy week. After all, the path of Wall Street, and by extension, global finance, hinges on how the week unfolds. It's a time of anticipation, of waiting for revelations, of adapting to the climate that these key earnings and economic data will set.

In these volatile times, it is reassuring to see that the U.S. economy remains sturdy, refusing to buckle under pressures both domestic and international. However, as history has repeatedly shown, the winds of finance can change rapidly, and the task at hand is to navigate these currents and steer towards a future that is both prosperous and equitable.

Sources:

Reuters

Yahoo Finance