Federal Reserve Meeting and July Jobs Report Highlight Week

The stock market rally is in its most fragile state in months ahead of Wall Street’s busiest week of the summer.

The S&P 500 (GSPC) and Nasdaq Composite (^IXIC) recently experienced their worst single-day drops since 2022. Despite a Friday rally, both indexes struggled to recover losses. The S&P 500 fell over 1%, while the Nasdaq dropped more than 2.3%. In contrast, the Dow Jones Industrial Average (DJI) rose by about 0.6%.

A significant week lies ahead, featuring a Federal Reserve meeting, the July jobs report, and earnings from major tech companies like Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Meta (META). Updates on job openings, activity in the services and manufacturing sectors, and consumer confidence are also on the calendar.

Investors will be watching corporate earnings closely, with 171 members of the S&P 500 set to report quarterly results. Among them are AMD (AMD), Arm (ARM), Boeing (BA), McDonald’s (MCD), and Starbucks (SBUX).

The Federal Reserve will announce its latest monetary policy decision next Wednesday, with markets expecting rates to hold steady. Recent economic updates have investors speculating about the timing of the Fed’s first rate cut. In June, the core Personal Consumption Expenditures (PCE) index rose 2.6% over the prior year, marking its lowest annual increase in more than three years. Additionally, the Consumer Price Index (CPI) showed a significant decrease.

The labor market has also shown signs of cooling, with the job openings to unemployed workers ratio returning to pre-pandemic levels. Last month, the unemployment rate reached its highest level since November 2021. This has led markets to anticipate a possible rate cut in September, with investors keenly awaiting Jerome Powell’s press conference on Wednesday for confirmation.

Friday’s release of the July jobs report will provide further insight into the labor market. Economists expect the report to show 175,000 nonfarm payroll jobs added to the US economy, with unemployment holding steady at 4.1%. In June, the US economy added 206,000 jobs, and the unemployment rate rose to 4.1%.

Wells Fargo’s economics team, led by Jay Bryson, noted that a 180,000 increase in payrolls would still be respectable but indicates a deteriorating job market. Measures such as the unemployment rate, quit rate, level of temporary help workers, and small business hiring plans suggest the labor market is weaker than its pre-pandemic state.

Big Tech stocks have recently slumped, with the Magnificent Seven ETF (MAGS)—tracking Nvidia (NVDA), Apple (AAPL), Alphabet (GOOGL, GOOG), Amazon (AMZN), Meta (META), Microsoft (MSFT), and Tesla (TSLA)—dropping about 12% since July 10. Truist co-chief investment officer Keith Lerner attributed the pullback to overstretched positioning in large tech stocks and investors rotating into other market areas that could benefit from potential Fed rate cuts.

Earnings from Amazon, Meta, Microsoft, and Apple could influence market direction, though the previous week’s reactions to Alphabet and Tesla earnings highlight the challenge of meeting high expectations. Evercore ISI’s Julian Emanuel noted that stocks missing Wall Street estimates for earnings or revenue are experiencing worse price reactions than seen over the past five years.

For now, earnings remain a catalyst for volatility rather than higher S&P 500 prices, according to Emanuel.

Weekly Calendar

Monday

• Economic data: Dallas Fed manufacturing activity, July (-14.2 expected, -15.1 prior)
• Earnings: McDonald’s (MCD), Philips (PHG), Tilray (TLRY)

Tuesday

• Economic data: S&P CoreLogic 20-city year-over-year NSA, May (7.2% prior); Conference Board consumer confidence, July (99.7 expected, 100.4 prior); JOLTS job openings, June (8.14 million prior); Dallas Fed services activity, (-4.1 prior)
• Earnings: Microsoft (MSFT), Advanced Micro Devices (AMD), BP (BP), Caesars Entertainment (CZR), Electronic Arts (EA), First Solar (FSLR), JetBlue (JBLU), Marathon Petroleum Corporation (MPC), Merck (MRK), Pinterest (PINS), Pfizer (PFE), Procter & Gamble (PG), Starbucks (SBUX), SoFi (SOFI)

Wednesday

• Economic data: MBA Mortgage Applications, week ended July 26 (-2.2% prior); ADP private payrolls, July (+168,000 expected, +150,000 prior); Minnesota Chicago PMI, July (44.0 expected, 47.4 prior); Employment cost index, second quarter (1.0% expected, 1.2% prior); Federal Reserve monetary policy decision (no interest rate change expected)
• Earnings: Meta (META), Altria (MO), Arm (ARM), Boeing (BA), Carvana (CVNA), Generac (GNRC), Humana (HUM), The Kraft Heinz Company (KHC), Mastercard (MA), Norwegian Cruise Lines (NCLH), Paycom (PAYC), Qualcomm (QCOM)

Thursday

• Economic data: Challenger jobs cuts, year-over-year, July, (+19.8% prior); Unit labor costs, second quarter (+4% prior); Nonfarm productivity, fourth quarter (+1.6% expected, +5.2% prior); Initial jobless claims, week ending July 27 (235,000 prior); S&P Global US manufacturing PMI, July final (49.5 prior); Construction spending, month-over-month, July (+0.2% expected, -0.1% prior); ISM manufacturing, July (49 expected, 48.5 prior); ISM prices paid, July (52.1 prior)
• Earnings: Apple (AAPL), Amazon (AMZN), Block (SQ), Booking Holdings (BKNG), Canada Goose (GOOS), Coinbase (COIN), ConocoPhillips (COP), Crocs (CROX), DraftKings (DKNG), Marathon Digital Holdings (MARA), Mobileye (MBLY), Moderna (MRNA), Roku (ROKU), SiriusXM (SIRI), Wayfair (W)

Friday

• Economic calendar: Nonfarm payrolls, July (+175,000 expected, +206,000 prior); Unemployment rate, January (4.1% expected, 4.1% previously); Average hourly earnings, month-over-month, July (+0.3% expected, +0.3% prior); Average hourly earnings, year-over-year, July (+3.7% expected, +3.9% prior); Average weekly hours worked, July (34.4 expected, 34.3 prior); Labor force participation rate, July (62.6% previously); Factory orders, June (+0.5% expected, -0.5% prior); Durable goods orders, June final (-6.6% prior).