Stocks fell slightly Monday to start a heavy earnings week with minimal new economic data outside the July Employment Situation Report.
Fed officials downplayed recession risks over the weekend and reinforced the push for higher interest rates and tight monetary policy to curb price pressures. Meanwhile, China warned that it will take military action if House Speaker Nancy Pelosi makes a visit to Taiwan that was rumored to happen as soon as early this week.
Jobs Report
The main highlight of this week will be the jobs report for last month which is expected to show the economy adding 250,000 jobs after 372,000 were added in June. Meanwhile, average hourly earnings are estimated to have risen 0.3% again and the unemployment rate is projected to stay flat at 3.6%. Lastly, the average workweek is expected to stay at 34.5 hours.
The projections for July are modest but still show an economy that is adding jobs albeit at a slower rate. The recovery from the pandemic has certainly slowed to a crawl but a 3.6% unemployment rate is still below long-term averages and the typical 4% targeted rate. The larger problem remains high inflation and corporate performance as recent earnings results have shown higher costs and continued supply chain issues eating into companies' profits. A modest gain in jobs and flat unemployment rate might not be enough to keep investors confident about the Fed’s ability to avoid a recession while raising rates to fight inflation.
Meanwhile, initial unemployment claims aren’t expected to help calm fears either as initial claims are projected to rise from 256,000 to 260,000 claims. Weekly claims have been steadily rising since mid March when claims fell to 166,000, the average weekly claims hovered around 210,000 before the pandemic.
Finally, the U.S. trade deficit is expected to shrink from -$85.5 billion to -$81.7 billion.
Earnings
Earnings season carries on this week with major players such as Starbucks (SBUX), PayPal (PYPL), Moderna (MRNA), Alibaba (BABA), CVS Health (CVS), Gilead (GILD), Advanced Micro Devices (AMD), BP (BP), Uber (UBER), and MGM Resorts (MGM) set to report. Earnings have been mixed so far this season with small beats and mixed results seeing more positive stock movement than usual.
Energy leaders managed to surpass estimates at the end of last week while big tech had mixed results, especially from those heavily reliant on advertising revenue.
AMD and ON Semiconductor (ON) should give some interesting insight into how chip supplies are doing as they have been one of the most impactful shortages since the pandemic. Moderna and CVS meanwhile should provide some updates on how the Covid vaccine is performing following Pfizer’s (PFE) report last week which showed record quarterly sales driven by its vaccine and antiviral treatment, Paxlovid.
Economic Events this Week
Wednesday
- 10:00 a.m. - ISM Non-Manufacturing Index
- 10:30 a.m.- EIA Crude Oil Inventories
Thursday
- 8:30 a.m. - Initial & Continuing Claims
- 8:30 a.m. - Trade Balance
- 10:30 a.m. - EIA Natural Gas Inventories
Friday
- 8:30 a.m. - Nonfarm Payrolls
- 8:30 a.m. - Unemployment Rate
- 8:30 a.m. - Average Hourly Earnings
Earnings Reports This Week
Tuesday:
Before the bell:
BP, MPC, CAT, UBER, CMI, ETN, LEA, MAR, EXPD
After the bell:
PRU, OXY, SBUX, PXD, PYPL, AMD, GILD, DCP, TX, ANDE, FNF, UNM
Wednesday:
Before the bell:
CVS, ABC, EPD, CDW, SUN, DISH, TT, EXC, MRNA, BERY, BWA, ETR, REGN, OMI
After the bell:
MCK, ET, MET, NTR, PAA, ALL, LUMN, LNC, BKNG, DXC, EQH, MGM, APA
Thursday:
Before the bell:
BABA, CI, COP, CBRE, PARA, IMOS, LLY, JCI, LNG, BCE, DUK, WRK, WCC
After the bell:
SU, WBD, AMGN, CTVA, EOG, SQ, OPEN, RGA, CVNA, LYV, RSG, XPO, ED
Friday:
Before the bell:
GT, WDC, TU, FLR, ADNT, IEP, WAB, FYBR, AXL
Sector and Industry Sentiment
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