During a week of strong economic data releases, as well as the implementation of the first tranche of tariffs against Chinese goods and Chinese counter tariffs against U.S. products (already discounted by the markets), markets enjoyed a respite from the escalation of trade concerns, Prudential’s Chief Market Strategist Quincy Krosby said Monday in her weekly “Connecting the Dots” outlook.
“This week, market participants will respond to leading inflation gauges, including the producer price index, import price index, and the consumer price index. With June’s employment report indicating that wages continue to remain muted, this week’s reports should offer a more extensive view of the scope of inflationary pressures,” Krosby noted.
The second quarter earnings season ramps up this week as major banks are set to report. Expectations are that 2Q earnings will deliver nearly 20 percent year-over-year growth.
“Investors are focused on guidance, and what companies are hearing from their customers in terms of trade concerns, as well as the effect of the stronger dollar on exports,” Krosby said. “With regard to banks specifically, we want to learn more about lending conditions and whether demand for loans is picking up.”
Federal Reserve speakers this week include the influential San Francisco Federal Reserve Bank President John Williams.
“Increasingly, analysts are interested in the Fed’s apparent commitment to a third or fourth rate hike this year amid mounting concerns over a potentially protracted trade war,” Krosby said.
In addition, President Donald Trump’s visit to Europe could generate market-related headlines as trade discussions are on the agenda.
Earnings to watch:
PepsiCo; Delta; Citigroup; JPMorgan Chase; PNC; Wells Fargo
This week’s important economic data:
Monday: Consumer Credit
Tuesday: NFIB Small Business Index; Job Openings and Labor Turnover Survey (JOLTS)
Wednesday: Producer Price Index (PPI)
Thursday: Consumer Price Index (CPI)
Friday: Import Price Index; Consumer Sentiment Index
Read Quincy Krosby’s Q3 Market Commentary: The Road to Normal.
The views and opinions are those of the author at the time of publication and are subject to change at any time due to market or economic conditions. This is solely for informational purposes. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.