S&P 500; US Indexes Fundamental Weekly Forecast – Earnings Season Winding Down; Inflation Report Major News

U.S. stocks indexes finished mixed last week. For the second consecutive week, the Dow performed the best. The NASDAQ closed slightly lower and the S&P fell between the two with its modest gain. The Dow also crossed 22,000 for the first time at mid-week and closed above this level on Friday. The S&P and NASDAQ failed to reach new highs.

In the cash market, the blue chip Dow Jones Industrial Average closed at 22,092.81, up 1.2%. For the year, the blue chip Dow is up 11.8%. The benchmark S&P 500 Index settled at 2,476.83, up 0.2%. It’s up 10.6% for the year. The tech-based NASDAQ Composite ended the week at 6,350.54, down 0.4%. It has gained 18.0% so far this year.

Last week, the markets were helped by earnings and economic data. According to reports, with about 75% of the companies in the S&P 500 having reported second-quarter results, earnings are up 10.1% year-over-year, outperforming the estimates of 6.4% recorded at the end of June.

Providing support from the economic side, the U.S. government reported the economy added 209,000 jobs in July, this was higher than the 183,000 consensus estimate. The unemployment rate dropped to 4.3% from 4.4%, matching is lowest level since 2001, even as the participation rate increased. The closely watched average hourly earnings came in unchanged.

Forecast

As earnings season winds down, we’re looking for a relatively quiet week of earnings and economic data. Thirty-five companies from the S&P 500 are expected to report second-quarter earnings, and U.S. inflation data will be released late in the week.

In the U.S., the major report is Friday’s Consumer Inflation report. July CPI is expected to rise 0.2%, up from 0.0% in June. Core CPI is expected to increase 0.2%, up from 0.1%.

Stronger-than-expected CPI data will increase the chances of another Fed rate hike later in the year.

Washington is on vacation for roughly the next three weeks. Therefore, political headlines may be diminished. The big concern for investors is the Trump administration’s links to Russia and its alleged attempt to influence the U.S. election. Last week’s announcement that a grand journey had been assembled to investigate the matter sent ripples in the market.

Geopolitical events in North Korea and Venezuela should also be watched. So far, the markets haven’t reacted negatively to any news regarding these countries. News that China may lean harder on North Korea could actually be a positive.