The S&P 500 and the Nasdaq Composite continued their rally last week as the earning season and after the US published weak nonfarm payrolls (NFP), which lowered odds of future interest rate hikes. IXIC jumped to 26,690, its highest level since June 16, while the SPX hit a record high of 7,794 points. This article highlights some of the top catalysts for US stocks this week.
S&P 500 and Nasdaq Composite to react to US CPI report
One of the crucial catalysts for the US stock market last week was last Friday’s jobs report. According to the Bureau of Labor Statistics (BLS), the economy lost 23k jobs in July this year, with the government shedding most of them.
The BLS also revised the June jobs report downwards, a sign that the labor market remains under pressure. At the same time, there are concerns about the jobs being created, with most of them being in the social and healthcare sectors.
The next important catalyst for US stocks will be the upcoming consumer price index (CPI) report, which will provide more color about the state of the economy. Economists expect the data to show that the headline CPI rose 0.1% in July after falling by 0.4% in the previous month.
The annual inflation rate is expected to come in at 3.4%, down slightly from the previous month’s 3.5%. This retreat will be mostly because cude oil and gasoline prices dropped a bit last month.
The core CPI, which excludes the volatile food and energy prices, is expected to retreat from 2.6% to 2.5%.
A lower-than-expected inflation rate will be bullish for the stock market because it will reduce the possibility of the Fed hiking interest rates.
Indeed, US bond yields have pulled back in the past few days, with the ten-year falling from 4.75% to 4.69%. The two-year yield also retreated to 4.2% from last month’s high of 4.37%. Also, the odds that the Fed will hike rates this year have fallen a bit.
US corporate earnings season
The other key catalyst for the Nasdaq Composite and S&P 500 Index is the ongoing earning season. Most companies have already published their earnings, with the blended earnings growth being 50%. Most of this growth is coming from technology companies, including popular names like SanDisk, Western Digital, and Microsoft.
More companies will release their numbers this week, with the most notable ones being Applied Materials, CoreWeave, Simon Property Group, Cardinal Health, Cisco, and Ross Stores. These earnings will provide more color on the state of the corporate sector.
Strait of Hormuz reopening
The stock market will also react to the US-Iran crisis, which seems to be at a gridlock for now. This crisis de-escalated last week after top military officials warned President Donald Trump of the severe weapons shortage.
Now, Iran has come up with a list of demandsit needs to reopen the Strait. It is demanding sanctions relief, ending the blockade, and the US millitary to leave its vicinity. As a result, crude oil perpetual futures have continued rising on Hyperliquid. Signs of a deal between the US and Iran will be bullish for the US stock market.
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