In the ever-changing world of finance, anticipation and speculation are the lifeblood of investors. As the current week draws to a close, we find ourselves peering into the enigmatic future, seeking clues and insights to decipher the unfolding narrative of the US stock markets. But, before we head into what to expect in the US stock markets over the following week, lets give a quick recap of the events of the last few days, which may influence US stock market tomorrow predictions:
Stocks on a Downward Streak
The S&P 500 and NASDAQ both saw minor dips this week after seeing a positive push going for the third straight week. The S&P 500 dropped by 1.40% this week, whereas NASDAQ saw a slip of 1.7%.
Meanwhile, the Dow seemed relatively safer, with a drop of merely 0.19%. This comes after an impressive 13-day winning spree, marking its most extended positive run since the memorable year of 1987. However, this triumphant rally came to a halt on Thursday, as at the US stock market today Dow Jones finished the day on a negative note.
Fed Returns to Rate Hiking Mode
As many anticipated, the U.S. Federal Reserve resumed its rate hiking endeavors after taking a breather in June. With a quarter-percentage point increase, the key benchmark rate now stands at its highest level since 2001, reaching a range of 5.25% to 5.50%.
This move marks the 11th rate hike since March 2022, when the Fed responded to soaring inflation by raising rates from a near-zero level, possibly influencing US stock today prediction like Dow jones Stocks shown below:
GDP Picks Up Steam
Good news for the U.S. economy! The second quarter showcased a rebound in momentum, putting to rest concerns about a potential recession amidst rising interest rates.
The GDP experienced growth at an annual rate of 2.4%, surpassing economists’ predictions and demonstrating improvement compared to the 2.0% rate observed in the first quarter of the current year.
Analysts suggest this economic impact may definitely be felt in US stock market tomorrow predictions.
Margins Feeling the Squeeze
As earnings season reached its midpoint, S&P 500 companies seem to be struggling with profitability. For the sixth consecutive quarter, profit margins are experiencing a decline, and thus contributing to US stocks going down today.
The average net profit margin, currently at 11.1%, dipped from 12.2% in the same quarter last year, according to FactSet data. This comes after reaching its peak at 13.0% in the second quarter of 2021.
Inflation Cools Off
The Fed’s favorite metric for tracking inflation showed a slowdown in June, with consumer prices rising at the slowest monthly pace in over two years, possibly hinting at a reversal for American stocks down
The Personal Consumption Expenditures Price Index experienced a 3.0% annual rate increase, which is lower than the 3.8% reported in May.
Excluding the impact of volatile food and energy prices, core inflation rose by 4.1% in June, showing a decline from the 4.6% recorded in May.
Year Yield Surpasses 4.00%
In the aftermath of the recent rate hike by the Federal Reserve, the yield on the 10-year U.S. Treasury bond concluded above 4.00% for the fourth instance this year.
Despite a slight pullback to approximately 3.97% on Friday, the interest rate remains considerably higher than the previous week’s closing level of 3.85%. This suggests ongoing concerns about inflationary pressures.
European Central Bank Joins the Hiking Trend
Across the pond, the European Central Bank (ECB) made its move, raising its key interest rate to 3.75%.
The ECB also hinted at a potential pause in its rate hiking cycle, possibly by September. While 3.75% marks the ECB’s highest rate in 22 years, it still lags behind the U.S. Federal Reserve’s current benchmark rate range of 5.25% to 5.50%.
Labor Market Update Awaits
On everyone’s radar is the upcoming U.S. labor market update, slated for release on Friday. Investors eagerly await July’s job growth, hoping to assess whether June’s slowdown was merely a hiccup. This will definitely be crucial in the US stock today prediction.
In the month of June, the economy experienced an increase of 209,000 new jobs, which did not meet the expectations of most economists. This figure marks the lowest monthly gain since December 2020. The month also saw the unemployment rate drop to 3.6%.Top of Form
Upcoming Earnings and Economic Milestones
So now that we had a look at all that’s taken place, let’s discuss the key events and milestones that are expected to occur in the days and weeks to follow, which will influence some America stocks going up and undoubtedly other American stocks down.
Earnings:
Johnson & Johnson (JNJ) reports earnings on August 2:
We have Johnson & Johnson’s earnings report just around the corner, scheduled for August 2. This one’s particularly important as it sets the tone for the healthcare sector.
Positive results could lift investor spirits, highlighting the sector’s resilience during these challenging times. On the flip side, any disappointing figures may raise concerns among investors and potentially lead to some market turbulence.
Pfizer (PFE) reports earnings on August 3:
Keep an eye out for Pfizer’s earnings on August 3. Given its significant role in COVID-19 vaccine production, this report is highly anticipated. Positive numbers may further boost confidence in the pharmaceutical sector, while any surprises could have implications for the broader healthcare and biotech industries, causing a rally to ensure America stocks going up.
UnitedHealth Group (UNH) reports earnings on August 4:
On August 4, UnitedHealth Group will release its earnings report. Being the largest health insurer in the US, UNH’s performance is closely watched. Strong earnings might brighten the sentiment in the healthcare space, while weaker results could raise concerns about healthcare utilization and costs.
Economic Milestones:
The US Bureau of Labor Statistics releases the July jobs report on August 5:
Mark your calendars for August 5 when the US Bureau of Labor Statistics drops the much-awaited July jobs report. It’s an essential indicator of the labor market’s health and potential inflationary pressures.
Positive job numbers may fuel confidence in the ongoing economic recovery, while any setbacks could impact investor sentiment and raise questions about economic growth. Ultimately they both feed into US stock market tomorrow predictions.
The US Commerce Department releases the July retail sales report on August 12:
Get ready for the US Commerce Department’s July retail sales report, scheduled for August 12. This data provides valuable insights into consumer spending, a critical driver to causing economic growth and even America stocks going up.
Strong retail sales figures may bolster confidence in the economy, while weaker numbers could indicate potential consumer spending challenges and have implications for the retail and consumer discretionary sectors. These are some of the factors which could cause certain US stocks going down today.
Market Sentiment and Investor Confidence
The current US investor sentiment stands at 44.91%, a slight decline from last week’s 51.36% and a substantial increase from the 29.59% recorded last year. It’s worth noting that the current sentiment is higher than the long-term average of 37.52%, which is definitely something to factor into US stock market tomorrow predictions.
These figures offer a glimpse into the improving conditions in the market, especially from the standpoint of investors, and could be positive in terms of America stocks going up. The decline from last week’s levels might indicate a more cautious approach among investors. However, the significant surge from last year suggests sustainable growth over the last 12 months.
Geopolitical Developments
Now, we all know that stock markets don’t exist in a vacuum, and are influenced by broader disruptions. In light of this, we highlight the following geopolitical developments to keep an eye on, which potentially could be factors in determining US stock today prediction:
- The US and UK are evacuating embassy staff from Niger after a coup. Niger is a crucial ally in fighting Islamist insurgents, and foreign powers fear the coup may strengthen militants. The Economic Community of West African States (Ecowas) imposed sanctions, and France asked for its embassy’s safety. This situation may impact stock markets due to geopolitical instability and potential disruptions in regional alliances and investments bringing about certain American stocks down, as a result.
- Ukrainian President Zelenskiy accuses Putin of attempting a “global catastrophe” by targeting Ukrainian grain infrastructure, leading to a spike in global grain prices. The Russian drone attacks on a grain silo and port facilities in Izmail aimed to disrupt food exports and collapse food markets. The situation may impact global food prices and supply, potentially affecting stock markets and agricultural industries worldwide. This too could trigger a selloff in certain sectors, and cause American stocks down, in the process.
- In a surprising move, Brazil’s central bank decided to cut its benchmark interest rate by 50 basis points, bringing it down to 13.25%. This decision was unexpected by economists.
This move comes after holding borrowing costs steady for nearly a year and following a series of aggressive rate hikes. Policymakers signal that more rate cuts are likely in the coming months due to an improving inflation outlook. The decision reflects a split among board members, but the bank’s policy statement suggests a consensus for further reductions. Keep this in mind when making US stock market tomorrow predictions.
- Taiwan’s Foreign Minister Joseph Wu warned of “disastrous results” for the world if China were to invade Taiwan. He emphasized the island’s strategic importance as a hub for the semiconductor industry and global shipping lanes. Wu expressed concerns over the potential commercial consequences, given that more than 50% of the world’s shipping containers pass through the Taiwan Strait.
Moreover, Taiwan’s near-monopoly on semiconductor production positions it as a crucial player in the contemporary global economy. As Taiwan approaches its presidential election, Wu pointed out the influence of a sophisticated disinformation campaign by China to sway voters. The escalating tensions between Taiwan and China have drawn international attention, with concerns that Taiwan might be the next target of Chinese aggression.
Federal Reserve and Monetary Policy
Looking ahead to next week, one crucial factor that investors should keep a close eye on is the Federal Reserve and its monetary policy. Recent data indicates a slight uptick in the year-over-year rate of growth in US True Money Supply (TMS) in June, suggesting a possible end to the decline seen since March 2022.
The monetary inflation rate, in turn, drives the yield curve, and if it continues to trend upward, we might witness a steepening trend in the next couple of months.
However, two potential scenarios could impact the US money supply and yield curve. The Fed’s Quantitative Tightening (QT) program, set to continue for several months, may cause monetary deflation unless significant money is released from the Reverse Repo (RRP) facility or a crisis prompts a new bout of Quantitative Easing (QE). Together, each of these variables plays into US stock today prediction, as well as US stock market tomorrow predictions.
Although a genuine crisis is not expected, a potential market weakness might lead the Fed to end QT and release funds from the RRP facility, potentially positively affecting the US monetary inflation rate and setting in motion a steepening trend in the yield curve by year-end.
Frequently Asked Questions
1- How will the recent rate hike by the Federal Reserve affect my investments?
The recent rate hike by the Federal Reserve may impact borrowing costs and economic growth, influencing different sectors of the stock market.
2- Should I worry about declining profit margins for S&P 500 companies?
Declining profit margins for S&P 500 companies could signal challenges for corporate earnings and stock performance, prompting investors to review their portfolios.
3- How might the US labor market update impact my retirement savings and investments?
The US labor market update can affect investor sentiment and market volatility, potentially impacting retirement savings and short-term investments.
4- How do geopolitical developments, like the coup in Niger or tensions between Taiwan and China, affect my investments?
Geopolitical developments can create market uncertainty and fluctuations in stock prices, affecting global trade, supply chains, and various market sectors, prompting investors to stay informed and manage risks.
