Market Volatility Expected as Earnings Season Kicks Off and Presidential Election Looms
Tech Stocks Roar Back to Life Ahead of Earnings Season 🚨
The stock market saw a significant surge on Monday, with the S&P 500 and Nasdaq Composite indices rising by 1.08% and 1.58%, respectively. This rebound comes after a tumultuous week that saw both indices experience their sharpest decline since April. The tech sector was the main driver of Monday’s gains, with chip heavyweight Nvidia (NVDA) leading the charge. The company’s stock rose by an impressive 4.5% during the session, recovering from heavy losses last week as investors rotated out of big-cap names. Other tech giants, such as Alphabet (GOOGL, GOOG) and Tesla (TSLA), also saw significant gains, rising by 2.5% and 5%, respectively.
The broad-based tech rebound on Monday was a welcome respite for investors, who have been bracing for a potentially volatile week ahead of earnings season. This week marks the beginning of a flood of earnings reports from S&P 500 companies, including tech giants Alphabet and Tesla, which are scheduled to report on Tuesday after the closing bell. These earnings reports will provide valuable insights into the state of the economy and consumer spending, and will likely have a significant impact on the market’s direction in the coming days. With the tech sector accounting for a significant portion of the S&P 500’s market capitalization, the performance of these companies will be closely watched by investors.
Political Uncertainty Looms 👀
The sudden exit of President Joe Biden from the presidential race has injected a degree of uncertainty into the market. While Democratic leaders have rallied around Vice President Kamala Harris, the political landscape remains fluid. This uncertainty could lead to increased volatility in the market, potentially impacting the performance of certain assets, such as bitcoin, bank stocks, and US bond yields. The yield on the benchmark 10-year Treasury (^TNX) slipped on Monday, as investors digested the implications of Biden’s exit on the market. The “Trump trade” bets on assets seen as benefiting from a second Trump presidency, such as bitcoin, bank stocks, and higher US bond yields, may also be unwound in the coming days.
Inflation Data on the Horizon 🚥
In addition to earnings season, investors will also be keeping a close eye on key inflation data, including the Personal Consumption Expenditures (PCE) index, which is set to be released on Friday. This data will provide valuable insights into the state of inflation and the overall health of the economy. The PCE index is the Federal Reserve‘s preferred inflation metric, and is closely watched by policymakers and investors alike. With inflation concerns still lingering in the market, the PCE index will be a key indicator of whether the economy is still on track for a soft landing.
Other Market Movers 🕺
In other market news, McDonald’s (MCD) announced that it would be extending its popular $5 meal deal through August. The promotion has been a huge success, driving foot traffic and boosting the brand’s affordable image. According to a memo obtained by Yahoo Finance, 93% of all McDonald’s restaurants voted yes to extend the $5 meal deal through August. The company’s US chief marketing officer, Tariq Hassan, said the deal successfully drove foot traffic back from competitors and boosted the brand’s affordable image after several price hikes. Customers drawn in by the deal may try other pricier items too. AMC Entertainment (AMC) also saw its stock soar after announcing a debt refinancing deal. The agreement was announced during the trading session, sending the stock up as much as 12% before paring gains. AMC said a series of refinancing transactions will allow it to extend the maturity of approximately $1.6 billion of the company’s debt due 2026 to 2029 and 2030.
What’s Next? 🤨
As earnings season gets underway, investors will be closely watching the performance of key companies and sectors. The political landscape remains uncertain, and investors will need to navigate this uncertainty to make informed investment decisions. With inflation data on the horizon, investors will also be keeping a close eye on the overall health of the economy. As the market continues to digest the implications of Biden’s exit and the start of earnings season, investors will be looking for signs of strength or weakness in the economy. With so many moving parts, it’s likely to be a volatile week ahead.
