S&P 500; US Indexes Fundamental Daily Forecast – Big Week for Earnings including Facebook and Amazon

U.S. equity markets are trading lower during the pre-market session as investors digest the earnings report from Alphabet, Google’s parent, which were released after the close on Monday. Investors are also preparing for Wednesday’s Fed interest rate decision and monetary policy statement. Investors widely expect the central bank to leave interest rates unchanged, but are hoping the Fed reveals a few clues about the chances of a third Fed rate hike before the end of the year.

This is a big week for earnings with approximately 180 S&P 500 components scheduled to report, including tech giants Facebook and Amazon.

After the close on Monday, Alphabet reported a second-quarter profit that fell sharply from a year earlier. The data showed a big anti-trust fine in Europe was the reason for the drop in profits. Shares were down as much as 3% in the after-hours market after the company reported its cost-per-click number fell 23 percent, more than the 15 percent drop analysts expected.

With the U.S. Dollar and Treasury markets indicating the economy is performing poorly, earnings seem to be the only reason why the major stock indexes are sitting just under their historical highs.

According to data from FactSet, 73 percent of S&P 500 companies that had reported beat earnings estimates and 77 percent topped sales estimates. This is good news because going into this season, investors had high hopes, with S&P Capital IQ’s earnings growth forecast at 6.2 percent.

Stocks have been moving higher even though it looks like President Donald Trump’s pro-growth agenda has been derailed with his administration’s inability to pass meaningful health care reform, tax reform or any of his promises to rebuild the country’s infrastructure.

Despite the recent rally, it should be noted that investors have actually been pulling money out of the stock market. The SPDR S&P 500 Trust, the biggest exchange-traded fund tracking the benchmark, reported that investors pulled $3.8 billion out of the trust in July through last Thursday. Bloomberg News’ Oliver Renick also said that this puts the fund on pace for a fourth consecutive monthly outflow, which would be the longest streak since the start of the bull rally in 2009.

At this time, it’s hard to tell investors to keep buying because I think the market is overvalued, but it’s also equally as hard to say bailout because the trend is so strong. The best advice at this time is to lighten up a little at current levels because I don’t know how much higher this market can go before the cracks in the economy encourage a wave of investor selling.