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?
Stocks were rising on Monday, as all of the major stock market indexes were up, fueled in part by the announcement that President Joe Biden would not seek a second term. 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, as Biden’s likely replacement at the top of the ticket, Vice President Kamala Harris, is viewed as having a better opportunity to win than Biden, at least according to early odds.
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 good start for the stock market this week follows the worst week for the markets since April, as the S&P 500 fell 2% last week 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 report this week, as Alphabet (NASDAQ:GOOG) releases earnings Tuesday after market close. Analysts anticipated 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 it is expected to see an earnings decline. Analysts estimate a 33% decline in earnings to 61 cents per share with sales increasing slightly to $25 billion after the car maker reported better than expected deliveries last month.
Also on Wednesday, the world’s largest payment processor, Visa (NYSE:V), releases its earnings for Q2. 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 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 inflation rates are sustainably falling toward the Fed’s target of 2% and will certainly heighten the expectations for one or more rate cuts in the second half of the year. And that, in turn, 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 if economic growth exceeded or fell short of expectations.
