CVS – CVS – CVS – Week Ahead: BOE, NFP, And FAAMG…Oh My! | Fintech Zoom | Fintech Zoom
There were two main highlights from last week: The Federal Reserve and earnings reports from some of the planet’s most valuable companies. As we noted in our , the central bank hinted at progress toward its goals for tapering asset purchases, but some of the comments from Chairman Powell’s testimony suggest that the full taper plan won’t be revealed until closer to Q4 (especially after Friday’s reading, the Fed’s preferred inflation figure, fell to 3.5% y/y).
Meanwhile, the big technology behemoths reported generally strong earnings, though with Tesla Motors (NASDAQ:) as the lone exception, each of their stocks closed notably lower on the week.
Bank of England
The Bank of England on Thursday, and though COVID cases in the country appear to have peaked for this wave (knock on wood), the central bank is unlikely to make any immediate changes to policy. That said, there have been some hawkish sentiments emerging from the Monetary Policy Committee in recent weeks following a jump in to 2.5% in June, the highest reading in three years and above the central bank’s 2.0% target. As such, traders will be watching to see if the BOE raises its inflation forecasts moving forward, hinting that the price pressures may be less transitory than expected.
Finally it’s worth noting that the UK furlough scheme winds down at the end of September, so it will be interesting to see if the central bank acknowledges the potential for the labor market to weaken in the coming months.
The monthly US has been particularly volatile of late as workers remain reticent to return amidst concerns about safety and continued elevated levels of unemployment insurance. Nonetheless, traders and economists are expecting a reading in the 925K range, which would mark the strongest labor market growth in eleven months if seen.
Astute readers will be watching the employment subcomponents of Monday’s report and Wednesday’s report, as well as Wednesday’s report for leading indications on whether Friday’s headline NFP report could beat expectations.
Beyond the headline jobs figure, the accompanying reading will also offer insight into the quality of the jobs created and potential for more inflation, with expectations currently centered on a 0.3% m/m rise.
So far, this quarter’s earnings have been characterized by stellar business results but relatively disappointing stock market reactions, as the FAAMG names last week exemplified. As always, traders are looking ahead and realizing that though the Q2 results have been undeniably strong, profit and revenue growth are likely to slow across the board heading through the second half of the year as stimulus starts to fade and the comparable quarters from last year represent slightly more normal business conditions.
Below are a few of the more notable companies that will be reporting this week:
HSBC (NYSE:), Alibaba (NYSE:), Eli Lilly (NYSE:), Amgen (NASDAQ:), BP (NYSE:), CVS Health (NYSE:), Roku (NASDAQ:), GlaxoSmithKline (NYSE:), Uber Technologies (NYSE:), General Motors (NYSE:), Beyond Meat (NASDAQ:), Moderna (NASDAQ:), Square (NYSE:).
Chart of the week: S&P 500
The , one of the most widely followed US stock indices, closed the week within a whisker of record highs. As the chart below shows, the index has consistently found support at its 50-day exponential moving average (EMA), signaling a strong, healthy uptrend. That said, the RSI indicator is showing a bearish divergence, forming lower highs at each of the last three price peaks; this divergence signals waning buying pressure and elevated odds of a near-term top, especially if this week’s earnings reports come in soft or the highly-anticipated US infrastructure bill encounters a hiccup.
Source: Tradingview, StoneX
Regardless, traders are likely to buy any short-term dips in the index unless and until support at the rising 50-day EMA is conclusively broken.