Michael Reinking:

Hello, I'm Michael Reinking, senior market strategist at the New York Stock Exchange, and this is Market Storylines. Every week, we are here to keep you up to date on the key trends and events driving global markets.

Summer is in full swing, but it's been another busy week full of key economic data, the official start of earnings season, Crypto Week in Washington, and some brief drama as President Trump had a flashback to his apprentice days. Now, we're recording on Thursday afternoon, so let's dive into this week's Market Storylines.

Now, as we approach options expiration tomorrow, the S&P 500 is trading in a pretty tight range for the second consecutive week, between 6,200 and 6,300, which we're sitting at the upper end of that range right now, right around all-time highs. Now, last week, investors took the barrage of negative trade headlines in stride. That reaction, or lack thereof, was the inspiration of the NYSE MAC Desk Q2 earnings preview titled Uncomfortably Numb, which you can find on the NYSE.com homepage.

Now, there isn't quite as much drama heading into the reporting season as the first quarter when we were in the midst of the tariff turmoil. Now, last quarter's sentiment was very negative and there was quite a bit of concern that companies would cut or withdraw guidance given the high level of uncertainty. Now, that didn't come to fruition according to facts that only eight of the approximately 250 companies that provided guidance during the quarter withdrew it, and only around 15% of those companies lowered guidance.

Now, this along with the solid numbers, largely from before the onset of the tariff uncertainty, and transparency from management teams who laid out operational initiatives and mitigation efforts helped to restore some confidence. Now, after a round of negative revisions which occurred mostly in April and May, analysts are looking for S&P 500 earnings to be up around 5% year over year. Now, that bar seems like it has been sufficiently lowered for companies to clear, especially since the economy continued to hold up throughout the quarter. However, with the S&P 500 up over 25% from the low, the big question is whether another round of solid numbers will be enough to push markets higher.

Now, the first week of earnings season is always dominated by the financials, and broadly, the numbers were strong, but the stocks have had a muted response. At a high level, the trading businesses performed well and investment banking improved with optimism that momentum would continue in the second half of the year.

Now, consumer spending trends remain resilient throughout, though there continued to be some caution related to the low income cohort, though there were no big red flags in terms of credit quality. But the scope of earnings will begin to broaden out in the coming weeks, but thus far, early indications from the handful of other companies that have reported suggest the numbers will be good. So let's quickly run through this week's economic data.

Now, inflation was the focal point this week. There was an uptick in CPI from last month. Headline was in line with expectations while core was a 10th better of 0.2% month over month. Now on Wednesday, PPI was flat month over month, also better than expected but offset by an upward revision to the previous month. Now on the surface, the numbers were okay, but the devil is in the details with signs that tariffs are starting to impact goods pricing, which is being offset by moderation in services inflation coming from travel related sectors and housing.

Now, according to the founder of Inflation Insights, Omar Sharif, core goods ex autos within CPI was up 0.55%, the highest level since 2021. Now, this morning's retail sales came in well ahead of estimates, rebounding 0.6% after falling nine tenths of a percent last month. Now, keep in mind, this data is not inflation adjusted and restaurant sales is the only services number included in the data, so some of that increase is related to that goods inflation, not necessarily a pickup in volumes. Now, this morning's claims that it was also better than expected with initial claims falling to 221,000 and continuing claims holding steady.

Now, from a Fed perspective, the data pretty much shuts the door on a July rate cut, which has caused a modest uptick in yields this week. The data continues to complicate the situation for Fed Chair Powell, as the committee will want to see if there is persistent increases over the next few months, putting him at odds with President Trump who continues to voice his displeasure with the monetary policy stance.

Now, on Wednesday, there was some volatility amidst reporting that President Trump was planning on firing the Fed chairman imminently. He later refuted that saying That was highly unlikely, though he maintained some optionality by saying unless there was fraud. Now that fraud he's referring to is the renovation of the Fed buildings, which has faced some cost overruns and become a focal point for members of the administration recently. Now earlier this week, Chair Powell asked the Central Bank's inspector general to review those costs.

Now, on the initial headlines, equity sold off and there was a steepening of the yield curve and the US dollar traded lower, but those moves have quickly reversed. Now, the big story coming out of the weekend was the sharp rally in cryptocurrencies amidst the steady stream of crypto treasury announcements and ahead of this week's crypto week in DC where the house is discussing legislation to establish a regulatory framework, including the Genius Act and Clarity Acts, which will provide a regulatory framework for digital assets. Now, there were some procedural holdups on those votes this week, but things seem to be back on track. Now, bitcoin started to break out to new all time highs at the end of last week and shot up to over 120,000 earlier this week before pulling back modestly. Now, other altcoins that are expected to bridge the gap between DeFi and traditional finance have been moving sharply higher throughout this week.

Now, quickly looking ahead to Friday, we had the university in Michigan Sentiment Survey with the focus on inflation expectations, and there are some key earnings over the next 24 hours, including Netflix, 3M, and American Express. Now Friday is also options expiration, which could introduce some volatility back into the market next week as positions roll off. Now keep in mind, the first two weeks of July is seasonally the best two week period during the year, and we're in the heart of the buyback blackout window. Now speaking of blackout windows, the FOMC Committee enters theirs next week. There is an ECB rate decision, and the key economic data includes the flash PMIs. However, next week is all about earnings.

Now, that's going to do it for this week. Thanks for spending some time with us. If you like today's episode, please tell a friend or leave a comment wherever you listen to your podcast. I'm Michael Reinking. Thanks for joining me, and have a great weekend.

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