Taking a Breath: Packed Week Looms After New Highs

(Friday market open) Major indexes regrouped today and edged higher despite Intel's (INTC) post-earnings plunge. On the plus side, Federal Reserve independence seemed more secure after President Trump and Fed Chairman Powell toured the Fed's renovation in hard hats Thursday and Trump said Powell's job is safe.

Powell steps into the spotlight again next week as the Fed gathers, though he and other policy makers likely will disappoint Trump by leaving rates unchanged. "The signal from the labor market is that it's holding up," said Kathy Jones, chief fixed income strategist at Schwab. "Pressure on the Fed to cut rates is likely to fall on deaf ears until at least September." Next week also includes earnings from four of the Magnificent Seven, the July nonfarm payrolls report, a host of Treasury auctions, and the August 1 trade deadline, setting up an obstacle course for Wall Street.

Stocks couldn't find much traction yesterday, perhaps awaiting fresh catalysts to justify more gains. With so much news ahead, it wouldn't shock if stocks consolidate in this slight break from heavy programming today and Monday. Trading could also be cautious as the trade deadline approaches with major deals unannounced. Though action was lackluster Thursday, both the S&P 500 index and the Nasdaq Composite closed at new all-time highs, with gains in Alphabet (GOOGL) and semiconductors balancing weakness in consumer stocks. It was the 15th record high of the year for the S&P 500 index, and stocks are on pace for a positive week.

1. Travel names get a bumpy ride with data ahead: American Airlines (AAL) and Southwest Airlines (LUV) disappointed with their quarterly results and guidance this week. Other travel-related stocks fell in sympathy Thursday, but casino firm Las Vegas Sands (LVS) posted solid earnings. While American and Southwest edged higher early today, the altitude loss yesterday came after strong quarters from United Airlines (UAL) and Delta Air Lines (DAL) that raised air travel stocks sharply earlier this month. Now investors have mixed signals. Apparently, business travel improved and overseas travel held up despite trade tensions, but back seats are emptier and American Airlines is cutting capacity. The long-term trend is one in which high-income consumers spend heavily while those lower on the income ladder cut back, and not just in airlines. That was reinforced by comments Thursday from Chipotle (CMG) as it sliced its sales forecast. Airlines and casino firms live in the consumer discretionary category of the S&P 500 index, and on recent strong market days these types of companies dominated the leader board. Next week's data, including personal spending and jobs, along with earnings from Visa (V) and Booking Holdings (BKNG), might help reset investor expectations around travel and other consumer discretionary stocks.
    
2. EU/U.S. trade deal—how it might play out: Headlines suggest the U.S. and EU are close to a deal that would slap 15% tariffs on imports from Europe. That level, while high, would be lower than the "reciprocal" tariff rate President Trump imposed on April 2. The market cheered 15% when the U.S. applied it to Japan's goods earlier this week—yet another sign that "better bad news" can sometimes lift stocks. Europe, however, prepares for a scenario where no deal is reached by August 1. In that case, it could target U.S. imports ranging from Kentucky bourbon to Boeing planes, The New York Times reported. Such talk raised fears of counter-reprisals from Trump, and Europe isn't in lockstep on the idea. One company not in favor, according to the Times, is the LVMH Moet Hennessy-Louis Vuitton luxury goods group. Its secretary-general pushed for negotiations and opposed a hard line, saying its business could become a "collateral victim" in a trade war.
    
3. Alphabet's earnings could have implications for others: As Meta Platforms (META), Amazon (AMZN), and Microsoft (MSFT) get ready to report next week, investors received what might be a positive sneak preview from Alphabet's results. Cloud growth of 32% for Alphabet was up sequentially and might bode well for cloud powerhouses Microsoft and Amazon—though if their cloud businesses grew less it could mean Alphabet taking share. And the solid quarter for search and YouTube suggests advertising demand remains strong, perhaps helping Meta. Apple is the fourth Mag 7 member reporting next week, and with its heavy exposure to overseas sales, a softer dollar during the second quarter could potentially provide a tailwind.

• Semiconductor giant Intel dropped 7% early. It missed analysts' average earnings per share estimate but beat revenue forecasts. It also predicted below-consensus third quarter earnings growth but above-consensus revenue. JPMorgan Chase (JPM) raised its price target on Intel after the results. Intel's CFO told Barron's he expects capital expenditures to fall next year, but the focus on cost cutting appeared to weigh on shares, according to Bloomberg.
   
• Centene (CNC) fell 15% ahead of the open after the healthcare firm missed analyst's average earnings estimate. It did beat consensus on revenue, but cut its 2025 outlook.
   
• Deckers Outdoor (DECK) popped 12% after the company beat analysts' earnings expectations as sales of Ugg and Hoka strengthened, Bloomberg reported. Still, shares were down 48% year to date through Thursday.
   
• Norfolk Southern (NSC) and Union Pacific (UNP) shares vacillated amid fresh media reports of a possible merger. A merger would link UNP's network across the western U.S. with Norfolk's East Coast routes, Bloomberg noted. However, regulatory approval could be challenge, as one argument against mergers is the inflation risk of concentration.
   
• T-Mobile US (TMUS) inched up after rising sharply yesterday on better-than-expected earnings. That and strength in Alphabet after its earnings helped the communication services sector Thursday.
   
• Dow (DOW) and Chipotle, two of yesterday's worst performers on disappointing earnings and guidance news, traded slightly higher this morning. IBM also rose. The sharp selloffs for all three reinforce a trend in which investors are severely rebuking companies that miss on earnings in this low-bar quarter.
   
• Kohl's (KSS) flattened after another rapid rise Thursday. It's been one of the "meme" stocks popular in social media circles lately.
   
• Bitcoin (/BTC) slipped more than 2% in the early going after a flat week following record highs earlier this month after Trump signed the "Genius Act." Stocks related to crypto, including Strategy (MSTR) and Coinbase (COIN), fell more than 1%.The crypto market's next catalyst could be the Clarity Act, Barron's reported. This addresses whether cryptos are commodities or securities, and which regulator oversees them. The bill still needs Senate approval.
   
• Ulta Beauty (ULTA) fell 1.4% ahead of the open after being downgraded to Hold from Buy at Loop Capital.
   
• June durable orders fell 9.3% on the month, better than the –11% Briefing.com consensus. Durable orders excluding transportation rose 0.2%, above expectations for –0.2% but down from a revised 0.6% in May.
   
• Chances of a Fed rate cut next week were less than 3% early Friday, according to the CME FedWatch Tool. Odds of a September cut are 62%.

Sailors are told, "Red at night, sailors delight. Red in the morning, sailors take warning." Stock traders might see the Cboe Volatility Index (VIX—candlesticks) in a similar way—as a warning of things to come. It fell below 15 intraday Thursday for the first time since late February, approaching its January low of 14.58. That corresponded with the S&P 500 index (SPX—purple line) making a new high above 6,370. When VIX—sometimes called the "fear index"—peaked above 60 in April, the SPX fell below 5,000. Not necessarily coincidentally, the February drop below 15 for the VIX corresponded with a then-record high for the SPX. However, market participants sometimes see a low VIX as a contrary signal of bearish times ahead for stocks. It certainly proved true back in February.

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.

July 28: Expected earnings from WM (WM), Nucor (NUE), and Whirlpool (WHR).
July 29: July consumer confidence and expected earnings from AstraZeneca (AZN), Stellantis (STLA), Boeing (BA), Booking (BKNG), Merck (MRK), PayPal (PYPL), Procter & Gamble (PG), Royal Caribbean (RCL), Spotify (SPOT), UnitedHealth (UNH), UPS (UPS), Starbucks (SBUX), and Visa (V).
July 30: Second quarter GDP first estimate and expected earnings from Altria (MO), Kraft Heinz (KHC), Humana (HUM), Etsy (ETSY), Microsoft (MSFT), Meta Platforms (META), Qualcomm (QCOM), Arm Holdings (ARM), Lam Research (LRCX), Carvana (CVNA), Allstate (ALL), Ford (F), and MGM (MGM).
July 31: June personal income, June personal spending, June PCE prices, and expected earnings from CVS Health (CVS), Biogen (BIIB), Apple (AAPL), Amazon (AMZN), Strategy (MSTR), Coinbase Global (COIN), Clorox (CLX), Roku (ROKU), and Lumen Technologies (LUMN).
August 1: July nonfarm payrolls, final July University of Michigan Consumer Sentiment, July ISM Manufacturing PMI^®, and expected earnings from Exxon Mobil (XOM) and Chevron (CVX).