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Earnings Season Kicks Off
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Bank earnings releases will start tomorrow.
PRE-OPEN MARKET COMMENTS MONDAY – Proposed tariff hikes on August 1st are as follows: Vietnam 20%, Japan and South Korea 25%, the EU and Mexico 30%, Canada 35%, China 40% and Brazil 50%. The market is shrugging the news off on the notion that some or all of these rates could change at a moment’s notice. The S&P 500 is only down 15 points on the news.
Earnings season will kick off this week and banks will dominate the releases. Credit card delinquencies and provisions for bad loan write downs will be scrutinized. Employment remains stable and I don’t believe there will be many surprises. The future is uncertain because of the tariffs and that is likely to impact forward guidance. This will create uncertainty and the market won’t like that. Major earnings releases won’t start for another week.
Analysts have lowered their expectations from $9.40% to 5% for the S&P 500 in the last few months. The bar has been lowered and that means we will see more “beats”. Stock valuations are “rich” and there is room for profit taking if earnings growth decelerates.
Economic releases this week include CPI, PPI, Empire Manufacturing, Philly Fed, Retail Sales, the Beige Book and Housing Starts. Inflation has been easing and I am not expecting any fireworks there. Economic activity has been slowing gradually and these numbers should not generate a big market move. Given that the tariff deadline is still a couple of weeks away, there is time for them to be revised. Based on the lack of heavy selling overnight, this news might not have much of a market impact this week.
The news will start to ramp up and this is a warm up for next week.
The FOMC Statement is in two weeks and there are rumors that Fed Chairman Powell could resign. I doubt it will happen since his term ends in 10 months. The market is expecting a rate cut this fall and that will take some of the pressure off of him.
The market gapped lower last Friday and it was able to recapture half of the gap. This morning we will test the low from Friday. Overnight losses have been pared and global markets had mixed marginal moves. News is pending this week and I am not expecting a big directional move today.
A major trading window is setting up in two weeks and I like sticking to very short-term trades. Good longs are easier to find than good shorts because of the market rally. That said, I am indifferent on which side to trade. If the stock has a breakout on excellent volume and it has RS/RW, that’s all that matters.
Support and resistance are the range from Friday.
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