NASDAQ 100, Dow Jones, S&P 500: Market Digests Earnings, Retail Sales Amid Looming Fed Decision

Highlights

• Earnings reports exceed expectations, but retail sales disappoint.
• Market cautious ahead of crucial Federal Reserve policy statement.
• Mixed sentiments prevail with uncertainty in the market.

Overview

US stock market investors are facing a day filled with earnings reports and the digestion of disappointing retail sales data. Futures tied to the Dow Jones Industrial Average, S&P 500, and Nasdaq-100 are experiencing minor declines on the opening, reflecting cautious investor sentiment. Our best guess is that the major players are sitting on their hands ahead of next week’s crucial Federal Reserve policy statement.

The Fed is widely expected to raise its benchmark rate by 25 basis points. However, the market isn’t sure if another rate hike is coming in September or if the Fed will pause. There is even some speculation that policymakers will begin cutting rates as early as December.

With so much uncertainty ahead, pensions and mutual funds seem to be keeping their powder dry ahead of the July 25 – 26 meeting.

Earnings Reports

Bank of America outperformed expectations in the second quarter, benefiting from higher interest rates, resulting in a 1% increase in the company’s stock. Similarly, Bank of N.Y. Mellon beat bottom-line expectations, although their shares are slipping by 1%. Morgan Stanley impressed with its revenue and adjusted earnings per share, primarily due to record revenue in its wealth management segment. However, PNC Financial is experiencing a 3% drop in stock value due to mixed second-quarter numbers. J.B. Hunt is expected to release its earnings report later in the day. FactSet reports that approximately 82% of the S&P 500 companies are exceeding profit estimates, indicating a strong start to the earnings season.

Soft Retail Sales Data

The Commerce Department’s report on advance retail sales in June revealed a modest 0.2% month-over-month increase, falling short of economists’ expectations of a 0.5% rise. Excluding auto sales, the increase is also limited to 0.2%, below the estimated 0.3%. While online purchases and miscellaneous stores are experiencing gains, sales at gasoline stations are declining by 1.4%. These figures, which are not adjusted for inflation, suggest that real sales are remaining relatively flat despite a 0.2% increase in the consumer price index.

Market Outlook

Investors are currently navigating the ongoing earnings season amidst a backdrop of recent inflation data. This data is giving rise to the belief among many investors that a soft-landing scenario is possible, contributing to the ongoing rally in stocks. However, some skepticism persists, with leading and concurrent indicators showing negativity. Despite a winning session that saw the Dow Jones Industrial Average close at its highest level this year, uncertainties remain in the market.

Conclusion

As the market continues to digest earnings reports and retail sales data, mixed sentiments are emerging. While some companies are exceeding expectations, others are experiencing declines in stock value. The soft retail sales data in June indicates weaker consumer spending, which is surprising given the positive inflation picture. As the earnings season progresses, investors are closely monitoring these developments to gauge the market’s direction.