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. Now, this is the busiest week of the summer, so there's a lot of ground to cover. It has also been a really exciting week here at the New York Stock Exchange with multiple successful high-profile IPOs which collectively raised about a billion and a half dollars of capital. I wanted to take a quick moment to welcome Ambiq Micro, Shoulder Innovations and Figma to our community of companies.Now, we are recording on Thursday afternoon, so let's dive into this week's Market Storylines.

Now, last week, US equity markets extended to the upside, helped by solid earnings and some trade deal announcements. The S&P 500 closed at a new all-time high in every session, ending the week up 1.5%, just under 6,400. Now this week, once again, investors are digesting a ton of earnings, more trade deals, some impactful economic data, and a Fed rate decision.

Now, with President Trump's and the MLB trade deadlines looming, the deals have started to flow in. Now, last week's Japan trade deal with a 15% tariff rate and investments in the US was the blueprint for deals with the EU and South Korea this week. Now after negotiations, it looks like there will be extensions for China and Mexico. However, Brazil, India, and Canada are on the outside looking in with tariffs set to go into effect tomorrow.

Now, on earnings, about a third of the companies in the S&P 500 are reporting this week. Now, in general, the numbers have continued to be solid. Tech, particularly the mega-cap tech components, are the standout. Now, last night, both Microsoft and Meta put up very strong numbers, continuing to benefit from AI demand and adoption with both stocks trading sharply higher today. Now elsewhere, the numbers are solid but there has been some cautious commentary on the impact of tariffs.

Companies have acknowledged that there will be a mix of some margin pressure and price increases. Now, payment processors and travel companies have highlighted a resilient consumer with sequential improvement throughout the quarter. The real check on consumer spending will come in a couple of weeks when the major retailers begin reporting. However, Amazon's earnings after the close will also shed some light on the matter.

Now, the biggest piece of economic data this week is still ahead of us with tomorrow's BLS employment report. Now, The Street is looking for around a hundred thousand jobs to be added to the economy. Now thus far, this week's labor market data continues to point to a resilient backdrop with ADP signaling and improvement in private sector hiring.

Now, Q2 GDP rebounded to 3% after last quarter's drop, but this was largely driven by trade-related swings in net exports. The consumption numbers also improved from Q1 but remained moderate at 1.2%. Though on the inflation front, this morning's PCE was in line with expectations, but like CPI and PPI goods, inflation has started to pick up, which is one of the dilemmas that the FOMC is facing.

Now yesterday, the Federal Reserve left rates unchanged to the surprise of absolutely no one. There were two dissenting governors, Waller and Bowman, who have both been vocal about their preference to cut recently. Now, Chair Powell largely kept to the same script, highlighting a resilient labor market that was broadly in balance. He noted that inflation had moderated with the easing of services inflation, but that it remained above target and highlighted the increase in goods prices. The chairman continued to describe monetary policy as modestly restrictive, but not at a level that was negatively impacting the economy, which was providing the committee with the flexibility to see how tariffs will impact both demand and prices.

Mr. Powell said that the base case could be for a short-lived impact, but said that it was still quite early days in making that assessment and wouldn't give any clear signal as to when the Fed would be prepared to move. He said that there had been no determination about the September meeting with the data determining the outcome maintaining optionality for the committee. This came as a disappointment to markets which have been yearning for more clarity.

Now, peak to trough equity markets pulled back about 1% during the press conference but only ended slightly lower on the session. Now, there has been some flattening of the yield curve with the expectations for the start of the easing cycle pushing out a little, and the probability for a September rate cut went from about 65% ahead of the meeting yesterday to about 40% today, with markets still pricing in one to two cuts by the end of the year.

Now, the S&P 500 has spent most of this week trading right around that 6,400 level before starting to come under some pressure this afternoon. However, it is the mega cap tech strength that has been masking some of the underlying weakness with the equal weight version of the index and small and mid-cap indices all down nearly 2% for the week.

Now, as we mentioned, there are some big catalysts before we end this week, including earnings from Apple and Amazon after the close, and the oil majors, Chevron and Exxon ahead of the open. Tomorrow's data includes the employment report and ISM Manufacturing.

Now, next week may finally start to feel like summer. Earnings will remain busy, but the major themes have been hashed out. Other than ISM services and claims, there isn't too much on the economic calendar. There will be a couple of rate decisions including India, Mexico, and the Bank of England.

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

Speaker 2:

That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen, and follow us on X @ICEhousePodcast. From the New York Stock Exchange, we'll talk to you again next week, inside the ICE House.

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