US Stocks Edge Up to Record Highs Ahead of Big Earnings Week
Wall Street closed relatively flat on Monday, ahead of a busy week of earnings announcements.
However, modest gains of 0.14% and 0.38% for the S&P 500 and the Nasdaq, respectively, saw both indices inch their way to record highs, as investors appeared to shrug off any concerns of the ongoing rift between the White House and the Federal Reserve.
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Strong Verizon Earnings Fuel Optimism
Once again, earnings season is upon us, and it’s off to a strong start.
As of Monday, 62 companies from the S&P 500 have thus far reported earnings, 85% of which have beaten expectations. Among these expectation-beating companies is Verizon, which released second quarter earnings before the market opened on Monday morning.
Not only did the telecommunication giant’s results beat analyst forecasts, but it also raised the lower end of its full-year profit outlook.
At the end of last week, Verizon’s share price was up just 2% year to date. However, its shares jumped 4% in Monday’s session, making it the S&P 500’s top performer and fuelling optimism that other results will also come in strong.
Also helping to drive Wall Street higher on Monday was Google parent Alphabet, which advanced 2.7% ahead of its own earnings announcement on Wednesday.
Bessent Calls for Federal Reserve Inquiry
US Treasury Secretary Scott Bessent on Monday called for a review to “examine the entire Federal Reserve institution and whether they have been successful”.
His comments mark an intensifying rift between the current administration in Washington and the US central bank.
Last week, reports circulated that US President Donald Trump might be preparing to fire Fed Chair Jerome Powell, who has been on the receiving end of regular criticism from the president over the Fed’s reluctance to lower interest rates. Trump later denied any such plan.
The Fed has held rates steady since December, opting to wait and see what effect Trump’s trade policies might have on prices before lowering rates any further.
The Fed’s next interest rate decision is due to be announced next Wednesday, 30 July, with rates expected to remain unchanged. Markets indicate that the Fed will probably cut rates at its following meeting, in September.
What to Look Out for This Week
With earnings season back underway, the pace of announcements is due to pick up in the coming days.
Taking centre stage this week are Alphabet and Tesla, the first of the Magnificent Seven to announce earnings, with both companies slated to release results on Wednesday.
Investors are likely to watch these announcements closely, and they could set the tone for the results of other tech giants in the coming weeks.
On the other side of the Atlantic, the European Central Bank (ECB) is due to announce its latest interest rate decision on Thursday. After seven consecutive cuts, the ECB is expected to hold interest rates steady this week.
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