TLDR
- Federal Reserve meeting scheduled this week with no rate cut expected, markets pricing only 3% chance
- July jobs report expected to show 101,000 new jobs added with unemployment rising to 4.2%
- Big Tech earnings from Apple, Amazon, Microsoft, and Meta will focus on AI spending plans
- Second quarter GDP expected to show 3% growth after first quarter contraction
- 164 S&P 500 companies reporting earnings this week with current growth at 6.4%
Markets are preparing for what’s expected to be the most active week of the summer on Wall Street. The S&P 500 reached record closes in five straight sessions last week, gaining 1.5%.
The Federal Reserve will announce its monetary policy decision on Wednesday. Markets are pricing in just a 3% chance of an interest rate cut at this meeting. Federal Governor Christopher Waller has hinted he may vote to lower rates, but investors expect no change this month.
Looking ahead to September, markets see a 64% chance the Fed will cut rates by at least a quarter percentage point. JPMorgan economist Michael Feroli expects focus to shift to any dissents among voting members of the Federal Open Market Committee.
The Bureau of Economic Analysis will release second quarter GDP data on Wednesday. Economists expect the US economy grew at a 3% annualized rate after contracting 0.5% in the first quarter.
Thursday brings the Fed’s preferred inflation measure, core PCE. Economists expect it to show 0.3% monthly growth in June, up from 0.2% in May. The annual rate is forecast to remain at 2.7%.
Labor Market in Focus
Friday’s jobs report is expected to show 101,000 nonfarm payrolls added in July. The unemployment rate is forecast to tick up to 4.2% from 4.1% in June.
In June, the economy added 106,000 jobs while unemployment unexpectedly fell. BNP Paribas economist Andrew Husby expects labor market data to keep Fed policy unchanged through year end.
This week features 164 S&P 500 companies reporting quarterly results. About one-third of the index has already reported, with earnings growth running at 6.4%.
Big Tech Earnings Take Center Stage
Apple, Amazon, Microsoft, and Meta will report results this week. Investors will focus on AI spending plans after Alphabet said capital expenditures would climb $10 billion to $85 billion in 2025.
Other major companies reporting include Boeing, Coinbase, Exxon Mobil, Chevron, and Starbucks. The current earnings season shows companies beating estimates while maintaining positive outlooks.
Citi strategist Scott Chronert noted this “beat-and-hold” pattern differs from recent quarters. Companies are topping estimates without lowering future guidance, supporting the stock rally.
Analysts have raised earnings growth estimates for the final two quarters of 2025 and all of 2026. FactSet data shows 2026 earnings growth expectations at 13.9%, up from 13.8% a month ago.
Goldman Sachs research shows speculative trading has surged recently. Their indicator tracking unprofitable stocks, penny stocks, and richly valued companies is near levels seen during the dot-com bubble and 2021 SPAC boom.
The indicator has historically signaled strong near-term returns but poor medium-term performance. Trade-related updates are also expected, with Friday marking President Trump’s latest deadline for deal negotiations.
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