Good morning,
After one of its strongest two-month rallies on record, the S&P 500 has largely stalled over the past six weeks. The index sits just 0.9% below its June 2 record high, making this the ninth-longest stretch without a new high since the start of 2021. Yet despite that drought, the S&P 500 remains 8.8% above its 200-day moving average—a sign that the market remains technically healthy. Rather than rolling over and forming a major top, the evidence suggests the market has simply been consolidating its powerful April-May advance.
That six-week consolidation now meets the start of earnings season tomorrow. FactSet currently projects S&P 500 earnings growth of 23.3% year over year for the second quarter—a blistering pace that sets a high bar for corporate America.
The week ahead will provide no shortage of catalysts. Earnings season begins with the major banks reporting Tuesday and Wednesday, followed by semiconductor equipment leader ASML on Wednesday and Taiwan Semiconductor (TSM) on Thursday. On the economic front, Tuesday brings the Consumer Price Index (CPI), while Fed Chair Kevin Warsh delivers his first semiannual testimony before Congress at 10:00 a.m. ET. Wednesday features the Producer Price Index (PPI). In addition, the Federal Reserve enters its pre-meeting quiet period on Friday ahead of its July 29 meeting, so expect a steady stream of comments from Chair Warsh and other Fed officials throughout the week.
Then, of course, there is the wildcard: U.S.-Iran negotiations—or the lack thereof.
It is a packed week. Ultimately, however, I believe markets will take their primary cue from corporate earnings. Expectations are undeniably high, but my sense is that companies will largely clear the hurdle and provide the catalyst needed to bring this period of consolidation to an end.
See you Friday.
Be well,
Mike