S&P 500 Slides As Traders Brace For A Busy Week Of Earnings, Fed Rate Decision

Key Takeaways:

• S&P 500 closed at 3,966.84 with a rise of 0.1%.
• Dow Jones Industrial Average closed at 31,990.04 with a rise of 0.3% or 90.75 points
• Nasdaq Composite closed at 11,782.67 with a decline of 0.4%.
• One-third of the companies listed on the S&P 500 are expected to report their earnings this week. Newmont Corporation's shares fell 13.2% after reporting a quarterly loss of 41% YoY due to declining gold prices.
• Philips shares declined 7.2% after reporting weaker-than-expected quarterly earnings due to lockdowns and supply chain issues.
• Energy stocks were the best-performing sector with Marathon Oil and APA Corp rising by more than 6%. Chevron was the top gainer in the Dow, rising nearly 3%. S&P 500 is 9% away from its 2022 low.

The U.S. stock market witnessed a volatile start to the week on Monday, as traders prepared themselves for a busy week ahead with a flurry of corporate earnings and a Federal Reserve rate decision. The S&P 500, which tracks the performance of 500 large companies listed on stock exchanges in the United States, closed the day slightly higher by 0.1%, closing at 3,966.84. The Dow Jones Industrial Average, which measures the performance of 30 large publicly owned companies based in the United States, saw a rise of 0.3% or 90.75 points, to close the day at 31,990.04.

On the other hand, the tech-heavy Nasdaq Composite, which is a market index that measures the performance of the largest technology companies in the US, had a rough day, sliding 0.4% to end the day at 11,782.67. Despite this, all the major averages are set to end the month on a high note, with each of them recording their best month of the year.

The final week of trading for July is shaping up to be one of the most significant weeks of the summer, with the Federal Reserve's policy meeting and the release of Gross Domestic Product (GDP) data being the main highlights. Nearly one-third of the companies listed on the S&P 500 are expected to report their earnings for the quarter, with tech giants such as Apple, Alphabet, and Microsoft being among the major companies that are set to announce their results. This is coming at a time when investors are increasingly worried about the prospect of an economic recession. 

According to Sam Stovall, Chief Investment Strategist at CFRA Research, investors believe that the GDP report, which is set to be released on Thursday, will show a decline for the second quarter in a row, which is a strong indicator of a recession. While the Federal Reserve is expected to announce a 75-basis-point rate hike on Wednesday, Stovall believes that the Fed will adopt a more moderate tone towards further rate hikes, which could help to continue the counter-trend rally in the near term.

Tech stocks had a rough day on Monday, with many of them ending the day lower. The slide was largely attributed to a warning by Snap, which reported disappointing earnings last week, causing investors to worry about declining digital ad spending in the current economic climate. Meta Platforms dropped 1.5% while Amazon slipped by 1.1%. Apple, Microsoft, and Alphabet also ended the day slightly lower.

Shares of Newmont Corporation, a mining company, fell 13.2% after the company reported a quarterly loss that was down nearly 41% from a year ago, due to a drop in gold prices. Philips, a Dutch medical equipment maker, tumbled 7.2% after the company reported weaker-than-expected quarterly earnings, citing lockdowns in China and supply chain issues as the main reasons for the decline.

On the other hand, energy stocks were the best-performing sector of the day, as oil prices rose. Marathon Oil and APA Corp each rose by more than 6%, while Diamondback Energy, Occidental Petroleum, Devon Energy, and Valero gained about 5% each. Chevron was the top gainer in the Dow, rising nearly 3%. The major averages are set to end the week on a positive note, with the S&P 500 and the Dow Jones Industrial Average recording their third positive week in four. The S&P 500 has been attempting to make a comeback after falling into a bear market earlier this year, and it currently sits 9% away from its 2022 low.

Last week, investors shifted their focus towards risk assets after a string of strong corporate results left Wall Street wondering if the economic slowdown that had been feared might not be as severe as initially expected. The markets will be keeping a close eye on the Fed's policy meeting, which is expected to provide more clarity on the future of interest rates, and the release of GDP data, which will give an idea of the state of the US economy.

Apart from the Fed's decision and the release of GDP data, the market will also be closely watching the earnings reports of major tech companies, which have been the driving force behind the market's recovery from the pandemic-driven lows. The market's performance this week will likely depend on the outlook that the Fed provides, the results of the earnings reports, and how the economy performs in the coming months.

Overall, the stock market is expected to remain volatile this week, with traders and investors trying to make sense of a busy week ahead. The market will be looking for direction from the Fed and the release of GDP data, as well as the earnings reports of major tech companies. With so many important events happening in the same week, traders and investors are likely to be cautious, and any surprises or unexpected results could cause significant swings in the stock market.

Markets Struggle Before Rate Decisions

Stocks fluctuated worldwide on Monday as central banks continue their efforts to combat inflation by raising interest rates. While London's stock market showed a slight 0.1% increase, Wall Street, Paris and Frankfurt saw drops in the morning and afternoon. In contrast, Shanghai and Tokyo finished higher. The Federal Reserve's rate hike of 25 basis points on Wednesday, followed by the Bank of England and European Central Bank, has caused uncertainty in the market due to potential recession and mixed earnings season results. The economies of Germany and Sweden shrank unexpectedly in the last quarter of 2022. In London, shares in 888, a gambling firm, plummeted by 27% due to the CEO's resignation and a probe into its Middle East operations, which also led to the suspension of VIP activities in the region.