Stocks are hovering near record highs, but last week’s market was punctuated by a whirlwind of trade announcements and deal-making that kept investors alert. This week, the focus turns to a heavy lineup of economic indicators and corporate earnings, both of which are poised to drive market sentiment and potentially reset expectations.
The most anticipated economic data this week is the Consumer Price Index (CPI), due Tuesday. Investors and policymakers alike are watching closely, with inflation trends likely to influence the Federal Reserve’s upcoming interest rate decision, which is less than two weeks away. Both “headline” and “core” CPI are expected to rise 0.3% in June.
A wave of earnings reports is set to arrive, beginning with big US banks such as JPMorgan, Wells Fargo, and Citi. Investors are particularly interested in IPO and M&A activity, and how companies like Wells Fargo are performing post-regulatory restrictions. Netflix and tech chipmakers ASML and TSM will also report, signaling how the AI boom is shaping earnings.
Earnings Slow, Tariffs Rise, but Markets Stay Calm as Fed Holds Steady
According to FactSet, analysts expect second-quarter earnings for the S&P 500 to grow by 5% — the slowest pace since Q4 2023. The quarter also includes the aftermath of Trump’s surprise “Liberation Day” tariff announcement, but markets appear to have already priced in that volatility. Q3 earnings are projected to grow 7.3%, with 2025 and 2026 expected to see even stronger gains.
Markets Hold Steady Ahead of CPI and Bank Earnings Despite Tariffs and Slowing Profit GrowthTrump’s new tariffs — including those aimed at Canada and proposals for blanket import tariffs — stirred some anxiety, but markets largely shrugged them off. The S&P 500 dipped only 0.33% from its high on Friday, indicating that investors are becoming desensitized to trade-related shocks. Trump claimed markets welcomed the tariffs, pointing to new highs as evidence.
Despite Trump’s pressure for rate cuts and calls for Jerome Powell to resign, the Federal Reserve is unlikely to change course this month. Core inflation remains sticky, and economists from Oxford Economics suggest the Fed will remain cautious, especially as the inflation-reducing effects of earlier oil price drops fade. CME data shows only a 4.7% chance of a July rate cut.
Tariffs Cloud Fed Outlook as Wall Street Bets on Resilient Corporate Earnings Growth
New tariffs may indirectly act as interest rate hikes, with economists like those at Bank of America estimating they could raise the effective tariff rate to 14%. This level of uncertainty complicates the Fed’s path forward, as policymakers wait for clearer signs of how these measures are impacting prices and consumer behavior before adjusting rates.
Wall Street analysts are adjusting their outlooks in response to market resilience. Goldman Sachs and Bank of America raised their S&P 500 year-end targets to 6,600 and 6,300, respectively. These revisions reflect growing confidence in the strength and earnings quality of large-cap companies, many of which are better equipped to withstand macroeconomic volatility.
Tech and communications are leading Q2 earnings, with sectors like Technology and Communication Services expected to grow 16.6% and 29.5%, respectively. These sectors include major AI players, and even Utilities — boosted by AI-driven energy demand — are expected to match the index’s 5% earnings growth. Overall, earnings strength continues to be a key support for valuations.
The week is packed with key earnings and data releases. CPI and major bank earnings kick off Tuesday. By Wednesday and Thursday, major tech and chip firms like ASML and Netflix report, alongside retail sales, jobless claims, and PPI data. The week wraps up Friday with updates on housing and consumer sentiment. Together, these releases will shape investor expectations for growth, inflation, and Fed policy moving forward.
