• We’ll get a lot of economic data points this week including the second-quarter GDP report.
  • There are a lot of earnings this week. More than 25% of the S&P 500 companies will report their earnings.
  • Economic data and earnings could keep investors on their toes before the Fed’s meeting.

Economic data

There are a lot of economic data releases this week. On Tuesday, we’ll get existing homes sales followed by new home sales and flash PMIs on Wednesday. The housing and manufacturing sectors have both shown signs of moderation. The data released last week showed that housing starts and building permits missed the estimates. The building permits fell to a two-year low. The manufacturing PMIs will be a key focus. Europe’s manufacturing PMI fell to a three-month low in June. The US manufacturing PMI also fell to multiyear lows in June. China’s June PMI showed a contraction in manufacturing. Europe’s PMI was also below 50 in June, which shows a fall in the manufacturing activity.

Other economic data points this week

On Thursday, we’ll get the durable goods orders. The metric has been important. There have been fears that businesses held back on their capital expenditure plans due to trade war uncertainty. Durable goods orders fell 1.3% in May compared to a fall of 2.8% in April. The core capital goods orders, which are non-defense capital goods excluding aircraft, increased 0.4% in May. Fewer Boeing (BA) orders were a major drag on the durable goods orders in May. The analysts polled by Thomson Reuters expect durable goods orders to rise 0.7% in June.

Economic Data and Earnings Before the Fed’s Meeting

We’ll get the second-quarter GDP numbers on Friday. The US economy rose 3.1% in the first quarter. The growth rates shattered the forecasts in the first quarter. Incidentally, several economists raised the 2019 US growth forecast after the first-quarter GDP report. However, the economy is expected to have risen at a much slower pace in the second quarter. According to the Reuters poll, the US economy could have expanded 1.8% in the second quarter. The estimates range from a minimum of 1.4% to a maximum of 2.9%. US economy registered a strong growth of 4.2% in the second quarter of 2018 largely due to the tax cuts. However, the impact of the tax cuts faded over the last year. The US fiscal deficit increased after the tax cuts.

Lots of earnings

Economic data and earnings will keep investors busy this week. According to CNBC, more than a quarter of the S&P 500 companies are scheduled to release their earnings this week. On Wednesday, Facebook (FB), AT&T (T), Boeing, Ford (F), and Tesla (TSLA) will release their earnings. Tesla stock has underperformed Ford in 2019. While Tesla’s deliveries have been better than expected, there are still concerns about its margins. AT&T plans to sell its Puerto Rico business to reduce debt. Amazon and Alphabet will report their earnings on Thursday. Amazon is battling an antitrust probe in Europe. Last week, leading US tech companies including Apple (AAPL), Amazon, Facebook, and Alphabet testified before US lawmakers as part of an antitrust probe. Alphabet has also been accused of working with China.

Fed will analyze economic data 

The Fed’s July policy meeting will take place next week. The Fed is widely expected to cut rates in July. However, the market is divided about whether the Fed will cut the rates by 25 basis points or 50 basis points. The economic data might not warrant an aggressive cut by 50 basis points. The Fed might cut the rates by 25 basis points. In the past, President Trump criticized Fed Chair Jerome Powell. President Trump thought that the Fed’s rate hikes were a dampener for the US economy.

Last week, in an interview with CNBC, BlackRock CEO Larry Fink said that he doesn’t see monetary policy as a key economic driver. According to Fink, fiscal measures are important. While some observers are apprehensive about US equity markets’ outlook after the S&P 500 (SPY) made a record high, Fink sees the markets moving even higher. Notably, the S&P 500 had its best first half since 1997. In the first quarter, Goldman Sachs forecast a flat market for the rest of the year. However, bears have had a tough ride this year. While trade war escalation provided fodder to bears in May, bulls have had the upper hand for most of the year.

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