July 31, 2017

Earnings reports from companies including Apple Inc. as well as a broad range of economic data releases probably will be the prime market movers this week, Prudential’s Chief Market Strategist Quincy Krosby said on her weekly “Connecting the Dots” outlook.

Quincy Krosby, Chief Market Strategist, Prudential

Even with 73 percent of reporting companies beating estimates this earnings season, investors, particularly in the technology sector, have followed the maxim of buying on the rumor and selling on the news, even with a positive earnings report, Krosby said. The market has punished companies with less-than-perfect announcements.

“We’ll see what happens with Apple,” she said. “If it’s strong, maybe it’ll help tech move a bit higher.” The Cupertino, California-based company reports Tuesday.

Earnings numbers have been mostly strong, with companies optimistic. “We’re seeing positive guidance from corporate management,” she said.

Historically, August tends to be a weak month for the market, she said. Trading volume declines as trading desks globally go on holiday. There also tends to be geopolitical news that can hurt the market. So far, the strong earnings season has eclipsed concerns about rising tensions with North Korea and concerns whether Washington can proceed with a pro-growth, pro-business agenda.

“August doldrums are not to be taken for granted,” Krosby said. “Statistically at least, this is one of the least hospitable periods for the market.”

Even with manufacturing, motor vehicle sales and service sector economic data releases this week, the jobs report Friday will be the most important, she said. Current expectations are for 180,000 new jobs, but the market will be paying extremely close attention to wage growth, and to a lesser extent the kinds of jobs that are being created. Both can help drive inflation, which is a prime concern of the Federal Reserve.

“If we see hourly wages moving higher and the workweek getting longer, it tells you that we are moving in the right direction with inflation,” Krosby said.

Read Quincy Krosby’s full Q3 Market Commentary: Third Quarter Checkup.

Lisa M. Bennett
phone 973-802-2894

Dara Scerbo
phone 973-367-9218

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.