Morning in New York: inflation data will signal the market

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The direction of trading on July 31 on the US stock exchanges will be set by the publication of important macroeconomic statistics, which may determine the future course of the Fed's policy. In the center of attention will be the key data for the regulator's inflation estimates of the core price index of personal consumption expenditures (PCE) for June (consensus: +0.3% m/m, May: +0.2% m/m). The acceleration of the index growth is stimulated by the tariff policy of the White House, however, we do not see any significant risks of actual figures exceeding forecasts.

Inflation continues to be supported by certain price categories with high sensitivity to changes in the terms of trade, but overall price dynamics remain under control. A value above consensus will intensify the discussion about the "rate premium" to inflation. This could negate expectations of a Fed rate cut in September. If PCE growth slows down, the supporters of the Fed's policy easing will get an additional argument to support their position.

A strong inflation signal can stimulate the growth of treasury yields and increase capital flows to defensive sectors.

In addition, June data on household income and expenditures will be released this Thursday. The consensus assumes an increase in the first indicator by 0.2% m/m after a decrease of 0.4% a month earlier and an increase in the second by 0.4% m/m after a decrease of 0.1% in May.

As usual on Thursdays, the unemployment claims statistics will be released (consensus: 224 thousand, previous value: 221 thousand). After the ADP report, it is important for investors to make sure that the trends reflected in it are stable. If the number of applications for benefits turns out to be higher than expected, it will confirm the cooling of the labor market and may increase concerns about the slowdown in economic growth.

Investors remain focused on foreign trade policy news. The period of suspension of reciprocal tariffs expires tomorrow, but during the postponement the White House managed to conclude only eight trade agreements. Agreements with partners important to the US such as Canada, Australia and India remain elusive. The risk of simultaneous duty increases for these countries is one of the main triggers of short-term volatility. The day before, duties of 15% on goods from South Korea were agreed. However, this deal, according to experts, was Seoul's forced reaction to a similar agreement with Japan, and discrepancies over the use of investments worth $350 billion only prove the haste of this decision.

Prior to the main session, Mastercard (MA), AbbVie (ABBV), Roblox (RBLX), Comcast (CMCSA), Bristol Myers Squibb (BMY), Cameco (CCJ) and Norwegian Cruise Line Holdings (NCLH) will report quarterly results. After the close, Apple (AAPL), Amazon (AMZN), Coinbase (COIN), MicroStrategy (MSTR), Reddit (RDDT), First Solar (FSLR) and Rocket Companies (RKT) will release financial results.

Futures on US indices show near zero dynamics. The combination of inflation data, news from trade negotiations and corporate reporting publications will determine the market sentiment. Financial results of bigtechs form a positive sentiment. We assess the balance of risks as neutral with increased volatility. We focus on S&P 500 fluctuations in the range of 6290-6450 points (from -1.1%, to +1.4% to the closing level of the previous session).

- Shares of Microsoft (MSFT) reacted by jumping up on a strong report that recorded cloud segment revenue growth ahead of the consensus of 39% YoY with consensus of 34% amid the AI boom. The corporation's second-quarter revenue rose 18% YoY to $76.4 billion, with EPS of $3.65.

- Quotes of Meta Platforms (META) positively met the publication of quarterly results. The company's revenue increased 22% YoY to $47.5 billion, while earnings per share rose 38% to $7.14. Investors were encouraged not only by the strong revenue growth from the core (advertising) business, but also by the strong guidance for the next quarter.

- Qualcomm (QCOM) securities suffered a sell-off as mobile chip revenue rose 7% YoY, underperforming the consensus. In addition, investors are concerned about the uncertainty of the impact of tariff policy on the company's business. At the same time, the issuer's total revenue grew by 10% YoY ahead of expectations, and the guidance for the current quarter exceeded the average market guidance.

- Shares of Align Technology (ALGN) collapsed on the release of its quarterly report, according to which its revenue fell 1.6% YoY to $1.01 billion (forecast: $1.06 billion) and earnings per share amounted to $2.49 (forecast: $2.57). However, the main reason for the negative dynamics was the conservative guidance for the third quarter, which confirmed investors' fears of a business slowdown.

- Quotes of Arm Holdings (ARM) fell 8% in the postmarket as its forecasts failed to meet investor expectations amid risks of weakening demand in the key smartphone segment due to geopolitical and foreign trade uncertainties. The company plans to allocate some of its profits to developing its own chips, putting pressure on its margins.

July 30 trading on the U.S. stock exchanges ended mostly in the negative. S&P 500 decreased by 0.12%, Dow Jones lost 0.38%, Russell 2000 dropped by 0.47%, and only NASDAQ 100 grew by 0.16%.

Most of the "Magnificent Seven" stocks closed in the red. Alphabet (GOOGL: +0.4%) held in positive territory on news of YouTube's introduction of new security features to protect teens in the U.S. starting Aug. 13.

Eight of the 11 sectors included in the broad market index showed a decline, led by materials producers (XLB: -2.02%) amid concerns about global demand and news about tariffs on commodities. The defensive utilities sector (XLU: +0.74%) was the leader of growth.

The results of the FOMC meeting were in the center of attention of the investment community. The key rate in accordance with the consensus was left within the range of 4.25-4.50%. At the same time, two members of the Board of Governors, Christopher Waller and Michelle Bowman, as predicted, spoke in favor of easing the MPC. The market initially perceived this as a "dovish" signal, but the head of the Federal Reserve Jerome Powell at the final press conference gave tough comments on the risk of accelerating inflation on the background of tariff policy. In this regard, the market's assessment of the probability of a rate cut in September fell under the 50% mark.

The argument in favor of the Fed Chairman's position was strong macro data. According to preliminary estimates, US GDP for the second quarter increased by 3% with a consensus of 2.4% after a decline of 0.5% in January - March. The number of new job openings in the private sector, according to ADP calculations, amounted to 104 thousand with average expectations of 109 thousand.

The White House announced a 25% duty on goods from India and imposed an additional 40% tariff on Brazil. A 50% duty on imported copper was officially announced, although an exemption for refined metal softened the blow to the market. An important step was the removal of de minimis preferential treatment for commercial shipments, which had a negative impact on the shares of logistics companies.

- Shares of Wingstop (WING: +26.9%) soared on the release of a strong quarterly report, a higher guidance and a dividend increase.

- The announcement of a strategic partnership with KKR and PIMCO to sell a $5 billion loan portfolio sparked a positive reaction in Harley-Davidson (HOG: +13.4%) stock prices, despite disappointing quarterly results and the withdrawal of its full-year guidance due to tariff policy uncertainty.

- Shares of logistics company Old Dominion Freight Line (ODFL: -9.7%) have come under pressure amid a continued weakening U.S. economy and declining freight volumes. Its quarterly results came in slightly below consensus.

- News of CyberArk's $25 billion acquisition, which implies a 26% premium to its share price, triggered a selloff in the securities of Palo Alto Networks (PANW: -5.6%).

- Altria (MO: +3.61%) reported an 8.3% rise in adjusted earnings and above-forecast revenue for the quarter. The tobacco company's management raised the lower end of its full-year earnings guidance, citing strong sales results for its smokeless product.

This article was AI-translated and verified by a human editor