There are no shortage of hurdles for the stock market to jump over in the coming week. After disappointing comments from Alphabet sent its stock price down this week and hurt the broader market, things will start to pick up next week, with Amazon, Metaplatform and Microsoft, the three major hyperscalers, reporting earnings on Wednesday and Thursday. Like Qualcomm, Apple is expected to release its results next week. Investors will be watching megacaps to see how long the current situation, where chip makers are rewarded while companies that invest heavily in AI are punished, continues. On the surface, Alphabet reported strong financial results this week, but its spending plans and negative free cash flow scared investors. The Round Hill Magnificent Seven ETF (MAGS) is down more than 5% so far this week, while the semiconductor ETF ended higher. “Investors are really scared that these companies are putting all their cash flow into things like AI and data centers, leaving shareholders with no buybacks or dividends,” said Ken Mahoney, CEO of Mahoney Asset Management. “And yet, earnings reports don’t tell us anything other than conceptually what the return on investment is.” “So for us hyperscalers, that’s a concern, so we’ve backed away from them for a while,” he added. The drop in mega-cap stocks also casts doubt on semiconductor trading, given that the rally in semiconductor prices is dependent on hyperscalers continuing to invest in AI. Investors remain confident in the outlook for semiconductor stocks, but are wary of increasing risks as more megacaps fall from their highs. MAGS YTD Mountain Round Hill Magnificent Seven ETF (MAGS), Year to Date The Federal Reserve will make its latest decision on interest rates on Wednesday. Given that opinions are widely divergent not only within the central bank but also on the streets, this will likely be a period of uncertainty regarding the direction of monetary policy. The consensus view is that the Fed will raise interest rates, but not until September. However, according to the CME FedWatch tool, federal funds futures contracts also price in a significant probability (35%) that the central bank will raise the benchmark borrowing rate by a quarter of a percentage point as early as next week. Whatever happens over the next week, the sour mood in the stock market could either dissipate or become even stronger. Stocks marked a weaker week on Friday as the resumption of fighting in the Middle East appeared to confirm growing suspicions among investors that there is no exit from the war between the United States and Iran. Oil prices are once again above $100 a barrel, and bond markets are showing warning signs that inflation expectations are on the rise, both in the long and short term. The major averages are expected to end this month in the red again, and if this holds true next week, it would bode ominously for August and September, seasonally considered the worst calendar months of the year. Historically, the S&P 500 has fallen 0.4% and 0.8%, respectively, in midterm election years, according to the Stock Traders Almanac. Indeed, many investors stay in the stock market for a long time. Corporate earnings remain strong, with S&P 500 companies expected to see second-quarter earnings growth of 38% year over year, according to FactSet. That’s far more than we originally expected. Dirk Wheeler, Citigroup’s global head of macro strategy and asset allocation, remains bullish on stocks, but said there is no shortage of potential risks that could change his optimism, from continued escalation in hostilities in the Middle East to a more hawkish Fed. But for the time being, he remains hopeful that the market can overcome those concerns. “The market continues to climb the wall of anxiety,” Wheeler wrote recently. Week Ahead Calendar All Time (ET). Monday, July 27th 8:30am Durable Order Report (June) Earnings: Cincinnati Financial, Nucor, UDR, Universal Health Services, Welltower, Cadence Design Systems Tuesday, July 28th 8:15am ADP Weekly Employment Change (07/18) 8:30am Wholesale Inventory Preliminary (June) 9:00am FHFA Home Price Index (May) 10:00 AM Consumer Confidence (July) Earnings: Royal Caribbean Group, CenterPoint Energy, DTE Energy, Corning, PayPal Holdings, Centene, Hilton Worldwide Holdings, United Parcel Service, Textron, Pentair, The Coca-Cola Co., Xylem, American Tower, Incyte, IQVIA Holdings, The Sherwin-Williams Co., The Boeing Company, Hubbell, Ecolab, Illinois Tool Works, BXP, CoStar Group, Expand Energy, Extra Space Storage, KLA, PPG Industries, Visa, Veralto, Waste Management, Skyworks Solutions, Omnicom Group, Ford Motor, Mondelez International, Seagate Technology, NXP Semiconductors NV, FirstEnergy, Teradyne Wednesday, July 29, 2:00 p.m. FOMC Meeting 2:00 p.m. Federal Funds Earnings Cap Target: Boston Scientific, Regency Centers, Amphenol, Biogen, Cognizant Technology Solutions, Flex, Vertiv Holdings, Generac Holdings, Humana, Stanley Black & Decker, GE Healthcare Technologies, Aon, Entergy, Smurfit Westlock, Lennox International, CBRE Group, Johnson Controls International, L3 Harris Technology, General Dynamics, Garmin, Old Dominion Freight Lines, Procter & Gamble, Vulcan Materials, Verisk Analytics, Fortive, American Water Works Company, Invitational Housing, Mid-America Apartment Communities, Meta Platform , Microsoft , Public Storage , Qualcomm , Starbucks , Tyler Technology , VICI Properties , Ventas , Align Technology , PTC , Carvana , Equinix , Fortinet , Robinhood Markets , Lam Research , Chipotle Mexican Grill , MGM Resorts International , O’Reilly Automotive Thursday, July 30th 8:30am GDP Chain Price First Qualifier (Q2) 8:30am GDP First Qualifier (Q2) 8:30am Initial Billing (07/25) 8:30am Core PCE Deflator (June) 8:30am Personal Consumption Expenditure (June) 8:30am Personal Income (June) Revenue: Exelon, Mastercard, Martin Marietta Materials, Regeneron Pharmaceuticals, Willis Towers Watson , Xcel Energy, Valero Energy, Air Products & Chemicals, The Cigna Group, Norwegian Cruise Line Holdings, Trane Technologies, Avery Dennison, KKR & Co., LabCorp Holdings, AO Smith, Quanta Services, American Electric Power Company, Bristol-Myers Squibb, Builders FirstSource, The Hershey Company, International Paper Company, Altria Group, Yum! Brands, Baxter International, Huntington Ingalls Industries, EMCOR Group, Intercontinental Exchange, The Southern Co., Coinbase Global, Camden Property Trust, Corteva, First Solar, GoDaddy, Ingersoll Rand, Alliant Energy, Mettler-Toledo International, Weyerhaeuser, Eversource Energy, Amazon, Monolithic Power Systems, Edison International, Stryker, Live Entertainment, Arthur J. Gallagher & Co, Apple Friday, July 31, 8:30am ECI Private Labor (Q2) 9:45am Chicago PMI (July) 10am Michigan Sentiment Final (July) Earnings: Moderna, AbbVie, Federal Realty Investment Trust, LyondellBasell Industries NV, Ares Management, Linde, Chevron, Eaton Company, Church & Dwight Company, Colgate-Palmolive, T. Rowe Price Group, Cboe Global Markets, Dominion Energy, Franklin Resources
