Stock Market Outlook Could Be Determined by Incoming Earnings Reports by Companies, Analysts Say

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Analysts opine that expected earnings reports could impact investors’ reaction to the stock market after last week’s volatility.

In light of last week’s stock market performance owing to rate fears, investors are now more likely to take cues from companies’ earnings reports. Throughout last week, stocks were volatile as hot inflation data triggered speculations of another substantial Fed interest rate hike. This changing investor sentiment on anticipated interest rates was only doused by strong Fed data by the end of last week. In the week ahead, investors will pay close attention to both housing and earnings data for future stock market predictions.

Stock Market Rebounds on Positive Fed Report as Other Business Earnings Loom

After a volatile week in the US stock market, all three major indexes posted sharp gains on Friday. This was probably caused by the market’s seemingly-dissipated concern that the Fed would raise interest rates by a full percentage point. Last Friday, Fed officials reported a surprise 1% June retail sales gain, and better-than-expected data on consumer inflation. Commenting on the reversal of expectations, Art Hogan, chief market strategist at National Securities, explained:

“It really was a great study in mob psychology. We went into the week with a 92% chance it was a 75 basis point hike, and we exited Wednesday with an 82% chance it was going to be 100 basis points.”

As of Friday, analysts concluded a 20% possibility for a 100 basis point hike.

However, the index gains were insufficient to totally erode the substantial losses sustained earlier. For instance, the S&P 500 was still down approximately one percent at 3,863.16.

Companies like PepsiCo (NASDAQ: PEP) and JPMorgan (NYSE: JPM) released quarterly earnings last week. In addition, a larger and even more diverse group of companies plan to release quarterly financial reports this week. They include Bank of AmericaGoldman Sachs, and Johnson & Johnson on Monday, and Netflix and Lockheed Martin on Tuesday. Wednesday’s quarterly earnings publications will feature Tesla and United Airlines, while AT&TUnion Pacific, and Travelers have a go on Thursday. For Friday, the market expects figures from American Express and Verizon.

Key Housing Reports

In addition to this week’s earnings, investors also have their sights set on key data releases – particularly around housing. Like the company earnings, these housing reports will be public at different times throughout the week. For instance, Monday will see a report from the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index. On subsequent days, there will be reports from the Philadelphia Fed manufacturing survey and the Purchasing Managers’ Index (PMI),

“Every data point matters and also what companies are saying,” explains Quincy Krosby, chief equity strategist at LPL Financial. Further touching on how these earnings paint a much broader picture of the economy’s trajectory, Krosby also added:

“If there are negative revisions and mounting concerns from the guidance, I think then you are going to see questions as to how the Fed is going to interpret that.”

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Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.