Stocks were up Monday after the announcement that President Biden was not seeking a second term. What is in store for the rest of the week?
All of the major stock market indexes were up on Monday, fueled in part by the announcement that President Joe Biden would not seek a second term in office. It marks the start of a big week for stocks as second-quarter earnings season moves full steam ahead, and a key inflation report comes out Friday.
The Biden announcement seemed to breathe new life into Democrats and the stock markets. Biden’s likely replacement at the top of the ticket, Vice President Kamala Harris, is being tipped as a more likely victor than her predecessor.
Technology stocks were the biggest beneficiaries Monday, as the Nasdaq Composite gained about 265 points, or 1.5%, as of early afternoon. The S&P 500 rose approximately 55 points, or 1%, while the Dow Jones Industrial Average ticked up about 115 points, or 0.3%. The Russell 2000 moved some 18 points higher, or 0.8%, as of early afternoon.
The stock market’s good start this week follows the worst week since April, when the S&P 500 fell 2% and the Nasdaq plummeted 3.7%.
Many big tech stocks got hammered, including NVIDIA (NASDAQ:NVDA), which fell 8.5% last week over talk of trade restrictions on semiconductor stocks in China and concern about its already high valuation. But NVIDIA bounced back, rising 4.3% on Monday to $123 per share, riding the tech stock rally.
Tesla and Alphabet report earnings this week
Earnings season is in full swing and the first of the Magnificent Seven stocks, Alphabet (NASDAQ:GOOG), reports its Q2 figures this week. Analysts anticipate earnings of $1.84 per share, up 28% year-over-year, and revenue of $84.2 billion, up 13% year-over-year.
In particular, Wall Street analysts will be looking for continued momentum related to its AI initiatives as well as growth in its cloud computing business. Alphabet’s earnings could provide an additional lift for tech stocks if they are positive, or potentially drag down the sector if they disappoint.
On Wednesday, after the market closes, EV maker Tesla (NASDAQ:TSLA) releases earnings, and an earnings decline is expected. Analysts estimate a 33% decline in earnings to 61 cents per share, with sales increasing slightly to $25 billion after the carmaker reported better-than-expected deliveries last month.
The world’s largest payment processor, Visa (NYSE:V), will also release its earnings on Wednesday. Visa typically provides insight into consumer spending and consumer confidence. Its rival, American Express, already posted strong earnings last week, so investors will be hoping for more of the same.
Other earnings to watch this week are Coca-Cola (NYSE:KO), Moodyʻs (NYSE:MCO) and GE Aerospace (NYSE:GE) on Tuesday; AT&T (NYSE:T), IBM (NYSE:IBM), and Chipotle Mexican Grill (NYSE:CMG) on Wednesday; and Southwest Airlines (NYSE:LUV) and Tradeweb Markets (NASDAQ:TW) on Thursday.
Inflation report looms Friday
There has been a lot of positive momentum, with inflation rates trending down over the past three months. On Friday, the Federal Reserve’s key indicator for the movement of prices, the Personal Consumption Expenditures (PCE) report, comes out, and it is highly anticipated.
The PCE index has dropped in each of the past two months, falling to 2.6% in May. The PCE index is expected to fall again in June, following the Consumer Price Index (CPI), which plummeted to 3% in June, from 3.3% in May.
Another decline in the PCE would show that inflation rates are sustainably falling toward the Fed’s target of 2%. This would certainly heighten expectations for one or more rate cuts in the second half of the year, which could potentially spark a stock market rally.
Finally, the Q2 gross domestic product, or GDP—a barometer for the growth of the overall economy—comes out on Thursday. Economists expect the GDP to have grown 1.9% in the second quarter, up from 1.4% in Q1. Investors will be watching closely to see if economic growth exceeds or falls short of expectations.
