Market trends and investor mood
This week is packed with significant events: a Federal Reserve meeting, the June employment report, and more than 1,000 earnings announcements from various companies—both large and small.
This schedule follows a tumultuous week:
- The S&P 500 declined by 0.8%. The Nasdaq Composite dropped 2.1%, while the Nasdaq-100 index fell 2.6%. In contrast, the Dow experienced a slight uptick, and the small-cap Russell surged by 3.5% as investors shifted funds towards non-tech sectors.
- The major indexes are now viewed as oversold rather than overbought. A crucial metric—MACD—indicates that the prevailing trend is downward for the moment.
- Kamala Harris has emerged as the leading candidate for the Democrats following Joe Biden’s exit from the presidential race.
- Nvidia has seen a nearly 20% decrease from its 52-week peak of 0.76 on June 20, causing concern given the significant market rebound since the lows of October.
Additional volatility is anticipated on Friday when the Labor Department releases its job figures for June.
However, there is no sign of panic in the markets. It seems that many investors who can realize profits are doing so while reallocating their capital. Money manager Jon Markman noted on Friday, “Success is not supposed to be easy.”
Significant economic happenings and metrics
This week features two major economic events. The first is the Federal Reserve meeting starting Tuesday. While there are discussions about the Fed cutting rates now, expectations point to the earliest possible date being September, with some economists forecasting December for the initial cut.
The Fed’s primary interest rate—the federal funds rate—has remained at 5.25% to 5.5% for nearly a year as the Fed continues to tackle inflationary pressures.
Bond yields are on a downward trend, suggesting traders anticipate lower rates. As reported by Freddie Mac, the national rate for 30-year mortgages stands at 6.75%, a drop from 7.8% in November but above approximately 3.2% at the close of 2022.
For many potential buyers, this rate is excessive, leading to challenges in sales across the nation throughout the year.
Just as crucial as the Fed meeting is the employment report scheduled for release on Friday by the Labor Department.
The consensus forecast is that the U.S. unemployment rate will remain at 4.1%, with payroll employment increasing by 185,000 jobs. A significant negative surprise—such as a sharp rise in the unemployment rate or a substantial decrease in payroll employment—could exert pressure on the financial markets.
It’s worth noting that job figures are estimates that undergo two revisions when the reports for July and August are published.
Another item of interest is the S&P CoreLogic Case-Shiller Home Price Indices, which tracks changes in home prices across various markets in the country, consistently indicating rising home prices.
Finally, the Chicago Purchasing Managers report on Wednesday will shed light on whether companies are purchasing necessary supplies for operations or if they are cutting back.
