Netflix results, retail sales, and a chip update: What to watch this week

The biggest economic event of July has come and gone.

For the balance of the month, investors will focus most of their attention on the corporate earnings calendar.

Netflix (NFLX) will be the first Big Tech company to report quarterly earnings during the current reporting period, with the streaming giant set to release results after the close on Thursday.

And with the AI trade continuing to dominate on Wall Street, investors will pay close attention to results from ASML (ASML) and Taiwan Semiconductor Manufacturing Company (TSM), set for release Wednesday and Thursday, respectively.

ASML is the leading manufacturer of lithography machines, which enable companies to actually imprint their designs onto new chips. TSMC is the world’s biggest chip manufacturer.

Elsewhere on the earnings calendar, reports from Goldman Sachs (GS), Morgan Stanley (MS), and Bank of America (BAC) will wrap up results from Wall Street’s biggest banks, while Dow members Johnson & Johnson (JNJ), American Express (AXP), UnitedHealth (UNH), and Travelers (TRV) are all expected to report.

Politics will also be a top concern for investors after Donald Trump survived an assassination attempt at a rally in Pennsylvania on Saturday. Business leaders were quick to react to the day’s events, condemning political violence and praising the former president’s “courage under literal fire [Saturday night].”

The Republican National Convention is set to be held this week in Milwaukee, which will see Trump formally named the Republican nominee for president.

The economic data calendar will be sparse, with Tuesday’s retail sales report for June serving as the highlight. After May’s results showed a surprise slowdown in spending, investors and Fed watchers will monitor the results for signs of further weakness in the US consumer.

The team at Oxford Economics expects retail sales to fall 0.4% in June, though this headline drop will be driven by a decline in gas prices. “We expect a solid 0.3% rise in underlying control group sales, which, with prices declining in June, will translate into a strong rise in real consumption to round out Q2,” the firm wrote in a note on Friday.

“The consumer is still in solid shape, underpinned by a labor market that is cooling, not collapsing, and the strong state of household balance sheets.”

Thursday’s inflation data turned markets upside down, with everything that had been working (read: “Magnificent Seven” names) coming under pressure and what had been left behind, most notably small caps, surging. Still, Friday’s rally sent stocks into the weekend with another weekly gain across the board.

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July ➡️ September

June inflation data published last week appeared to almost cement the prospects of the Federal Reserve cutting interest rates beginning in September.

A multiyear low in annual inflation and the first monthly drop in headline inflation since 2020 pushed the odds north of 85% that rate cuts will start in the fall, data from the CME Group showed.

In June, headline inflation fell 0.1% from the prior month and rose 3% against the prior year. On a “core” basis, which strips out food and energy costs, consumer prices were up 0.2% from last month and 3.3% from last year.

The Fed targets 2% inflation.

June’s jobs report published earlier this month raised the temperature on the Fed to act in September. The unemployment rate move up to 4.1% signaled the pace of cooling in the labor market appears to be accelerating and puts the labor market back in focus for the central bank after nearly two years of inflation being its primary concern.

Fed Chair Jerome Powell’s appearance on Capitol Hill last week made clear the central bank’s move this fall will be perceived as a political decision by critics on both sides of the aisle. But the economic basis for a rate cut has only grown clearer in recent weeks.

“On balance, the economic data are the most supportive of a rate cut that they have been all year,” wrote Wells Fargo economists Sarah House and Michael Pugliese in a client note this week.

As Yahoo Finance’s Jared Blikre noted this week, the unemployment rate is now on the cusp of triggering the Sahm Rule, which measures the rate of increase in the unemployment rate and has been a leading indicator in each of the last nine US recessions.

On July 31, Powell will hold a press conference following the conclusion of the Fed’s next two-day policy meeting. This event, along with Powell’s speech at the Jackson Hole Economic Symposium in late August, will give the chair plenty of opportunity to prime markets for a move come September.

Weekly calendar

Monday

Economic data: New York Fed Empire State Manufacturing index, July (-6 expected, -6 previously)

Earnings: Goldman Sachs (GS), BlackRock (BLK)

Tuesday

Economic data: Retail sales, June (-0.2% expected, +0.1% previously); Import price index, June (-0.1% expected, -0.4% previously); Export price index, June (-0.1% expected, -0.6% previously); NAHB homebuilder sentiment, July (43 expected, 43 previously)

Earnings: Bank of America (BAC), Morgan Stanley (MS), UnitedHealth (UNH), Charles Schwab (SCHW), Interactive Brokers (IBKR), Progressive (PGR), PNC Financial (PNC), State Street (STT)

Wednesday

Economic data: Housing starts, June (+1.8% expected, -5.5% previously); Building permits, June (-0.6% expected, -3.8% previously); Industrial production, June (+0.4% expected, +0.9% previously); Federal Reserve Beige Book

Earnings: Johnson & Johnson (JNJ), United Airlines (UAL), ASML (ASML), Discover (DFS), US Bancorp (USB), Citizens Financial (CFG), Ally Financial (ALLY), Synchrony (SYF), Alcoa (AA), Kinder Morgan (KMI), Steel Dynamics (STLD)

Thursday

Economic data: Initial jobless claims, July 13 (228,000 expected, 222,000 previously); Continuing jobless claims (1.852 million previously)

Earnings: TSMC (TSM), Netflix (NFLX), Domino’s (DPZ), Blackstone (BX), Alaska Air (ALK), Abbott Labs (ABT), Novartis (NVS), Textron (TXT), Cintas (CTAS), Intuitive Surgical (ISRG), PPG (PPG)

Friday

Economic data: No major economic data set for release.

Earnings: American Express (AXP), Travelers (TRV), Halliburton (HAL), SLB (SLB), Fifth Third (FITB), Regions Financial (RF)

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