U.S. stocks exhibited mostly positive performance on Monday, ahead of crucial inflation data and the commencement of the second-quarter earnings season. Investors held hopes that the Federal Reserve may soon conclude its series of interest rate hikes.
The Dow Jones Industrial Average rose by 152 points, or 0.5%, reaching 33,888. Meanwhile, the S&P 500 saw a slight gain of 6 points, or 0.1%, reaching 4,405. However, the Nasdaq Composite experienced a minor decline of 5 points, or less than 0.1%, reaching 13,654. On Friday, the Dow Jones Industrial Average fell by 187 points, or 0.55%, reaching 33,735, while the S&P 500 declined by 13 points, or 0.29%, reaching 4,399. The Nasdaq Composite also dropped by 18 points, or 0.13%, reaching 13,661.
The market sentiment at the beginning of the week appeared positive after the S&P 500 recorded a 1.2% decline last week, driven by relatively strong economic data that pushed bond yields towards cyclical highs. As a result, traders and analysts are closely monitoring the upcoming consumer price index data scheduled for release on Wednesday.
Analysts noted that U.S. inflation, expected to have decreased from 4% to around 3% in June, with a possible uptick in monthly data, will play a crucial role. However, core inflation may remain somewhat elevated, around the 5% mark. If inflation data comes in softer than expected, it could potentially influence the stance of hawkish members within the Federal Reserve, providing support for U.S. stocks that concluded the first week of July and the first week of the second half of the year on a negative note.
Louis Navellier, Chairman and Founder at Navellier & Associates, expressed confidence that the Federal Reserve will decisively pause its actions after this week, based on favorable inflation evidence and lackluster payroll data from the Labor Department.
Additionally, traders should consider the second-quarter corporate earnings season in the United States, which will commence on Friday with the release of financial reports from major banks such as JPMorgan Chase, Citigroup, and Wells Fargo. It is projected that profits for the S&P 500 will decline by 6.4%, although excluding the energy sector, the drop is anticipated to be only 0.7%, according to Refinitiv.
Given the developments in the tech sector this year, there will be increased focus on artificial intelligence (AI) during the earnings season. Stephen Innes, Managing Partner at SPI Asset Management, emphasized that the timing and ability of S&P 500 companies to generate incremental profits from AI remain uncertain. Therefore, management guidance and commentary will be crucial in identifying the enablers, scalers, and long-term beneficiaries of AI.
