This week, the New York stock market is expected to focus on the Federal Reserve's June Federal Open Market Committee (FOMC) minutes and the onset of the second-quarter earnings season. Last week, the Dow Jones Industrial Average closed at a record high, but artificial intelligence (AI) and semiconductor stocks faced profit-taking pressures. Although concerns about interest rate hikes have eased somewhat due to slowing employment, the concentration of technology stocks and earnings expectations could increase market volatility.
According to financial investment industry sources, the Dow Jones Industrial Average rose about 2% last week, closing at 52,900.07. The S&P 500 index increased by 1.8% to 7,483.24, while the Nasdaq composite rose 2.1% to 25,832.67. However, the Nasdaq's momentum slowed in the latter part of the week due to weakness in semiconductor stocks.
The biggest variable is the release of the June FOMC minutes on July 8. The Fed held the benchmark interest rate steady at 3.50% to 3.75% during last month's meeting, stating that "economic activity is solid, but inflation still exceeds the 2% target." How Fed officials interpret the slowing employment and inflation pressures in this minutes will likely influence future interest rate projections.
The June employment report released last week alleviated some market concerns about tightening. Nonfarm payrolls in the U.S. increased by only 57,000 in June, with the unemployment rate at 4.2%. Additionally, the employment figures for April and May were revised down by a total of 74,000. While the slowdown in employment may reduce pressure for further rate hikes, it could also raise concerns about economic deceleration, presenting a dual-edged factor for the stock market.
The economic data schedule is relatively light. On July 6, the finalized S&P services Purchasing Managers' Index (PMI) and the Institute for Supply Management (ISM) services index will be released. On July 7, the May trade balance will be announced, followed by the May wholesale inventories and FOMC minutes on July 8. Weekly initial jobless claims and June existing home sales will be reported on July 9. The Consumer Price Index (CPI) and Producer Price Index (PPI) are scheduled for release on July 14 and 15, respectively.
The earnings reports this week are expected to serve as a preliminary exploration before the main earnings season. Companies such as Levi's, PepsiCo, and Delta Air Lines will report their earnings. Major bank earnings will begin next week. The market anticipates that PepsiCo's results will provide insights into consumer goods demand and pricing effects, while Delta's earnings will shed light on summer travel demand and cost pressures in the airline industry.
Expectations for earnings are already high. FactSet estimates that S&P 500 companies' second-quarter net income will increase by 23.3% compared to the same period last year, with a projected revenue growth rate of 12.2%. However, the S&P 500's 12-month forward price-to-earnings ratio (P/E) stands at 20.4, exceeding both the five-year and ten-year averages. If earnings fall short of expectations, valuation pressures may become more pronounced.
The movement of AI-related stocks is also crucial. Semiconductor and AI infrastructure stocks, which have driven this year's market rally, are experiencing increased fatigue from recent surges. While expectations for large-cap tech earnings remain high, the concentration of gains in certain stocks raises concerns that profit-taking could lead to increased volatility in the Nasdaq.
This week, the New York stock market is likely to moderate its pace rather than establish a clear direction ahead of the Fed minutes and earnings season. While slowing employment may alleviate interest rate burdens, concerns about economic deceleration and the overvaluation of tech stocks persist. The market will be watching for the Fed's potential for further rate hikes, trends in the services sector, and the earnings of consumer and airline stocks as it awaits next week's inflation indicators and major bank earnings.
* This article has been translated by AI.
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