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Nasdaq Composite Index surged 3.3% last week to also print 15-month highs amid increasing investor optimism surrounding the generative AI revolution. Dow Jones Industrial Average rose 2.3% as it still attempts to break the 3,4500 near-term resistance.
The U.S. equity markets received another boost last week after June’s CPI report showed inflation rose just 0.2%, less than expected. Compared to a year-ago period, prices jumped 3%, which is the lowest YoY increase since March 2021.
Excluding food and energy, core CPI increased 0.2% and 4.8%, respectively.
For the week ahead, the focus will be on tomorrow’s Retail Sales report. The market expects retail sales to jump 0.5% MoM in June.
Q2 earnings season in full swing
About 6% of S&P 500 companies have reported actual results so far, with 80% of them having reported a positive EPS surprise and 63% of S&P 500 companies reported a positive revenue surprise, according to FactSet.
Analysts expect to see a 7.1% earnings decline for the S&P 500. On June 30, the estimated earnings decline for Q2 2023 was -7.0%.
JPMorgan Chase & Co (NYSE:JPM) and Wells Fargo (NYSE:WFC) shares rose last week after strong results, while UnitedHealth (NYSE:UNH) and PepsiCo (NASDAQ:PEP) also saw their stocks surge higher on better-than-expected results.
Looking forward to this week, Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) will continue the bank earnings season tomorrow while Goldman Sachs (NYSE:GS) reports on Wednesday. Lockheed Martin (NYSE:LMT) is also due to report on Tuesday.
The Big Tech earnings season starts on Wednesday when Tesla (NASDAQ:TSLA) and Netflix (NASDAQ:NFLX) take the center of the stage. IBM (NYSE:IBM) and United Airlines (NASDAQ:UAL) are also scheduled to report on Wednesday.
The end of the week is reserved for Johnson & Johnson (NYSE:JNJ, American Airlines (NASDAQ:AAL) (AAL), and American Express (NYSE:AXP).
What analysts are saying about U.S. stocks
JPMorgan analysts: “Since the relative high in May to early last week, Eurozone has lost 12% vs the US, in USD terms, and is trying to bounce. We believe there is another leg of underperformance ahead, and reiterate our moving the region to UW two months ago. This was partly given our view that Eurozone activity momentum was about to roll over.”
Roth MKM analysts: “We are starting to see minor negative divergences build on the top-down view of the S&P 500 but not enough to cause concern. There has been a swift improvement in sentiment as a chase mentality builds. Breadth was improved. The breakdown of the US dollar should provide tailwinds for stocks and commodities. The Materials sector should play catch up to the breakout in Industrials.”
Fairlead analysts: “The major indices pushed higher ahead of earnings season, allowing the SPX to reach the measured move projection of ~4510 last week from May’s breakout. Momentum gauges still point higher, suggesting the SPX may make progress toward minor resistance from early 2022 near 4600. However, we would be wary of any downturns noting signs of upside exhaustion have arisen for the SPX and NDX.”
BTIG analysts: “The major indices have gotten off to a strong start over the first half of July. Towards the end of last week, however, we started to see some signs of exhaustion and upside capitulation… With many names having rallied significantly over the last three months, we wouldn’t be surprised to see more of this over the coming weeks, which would be indicative of buyer exhaustion.”
Sevens Report analysts: “At current levels, the S&P 500 has priced in 1) No hard landing, 2) Falling inflation and 3) A Fed that won’t be raising rates much longer (and possibly cutting soon after). That’s basically the best outcome anyone could have hoped for at the start of the year, and that means the gains in stocks are legitimate, but also likely exhausted in the near term and it’ll take something else to push stocks materially higher from here.”
