Traders Await the Fed and the Busiest Week of Second-Quarter Earnings

The indexes are trading flat on Friday morning as investors await the start of the busiest week of earnings on Monday. The S&P 500 has hit new all-time highs in 10 of the last 20 sessions and avoided a "sell the news" reaction so far during second-quarter earnings season.

Optimism about trade deals has helped market sentiment, and there are still few signs of inflation or slowing growth. The Wall Street Journal is reporting that so far, the brunt of tariffs has been paid for by decreased margins. There has been about $55 billion in tariffs collected so far this year, and most of it has not been passed through to consumers.

Next week will be particularly eventful with a flood of earnings and the Federal Reserve interest rate decision on Wednesday, July 30 at 2 p.m. ET. Despite Trump’s constant pressure on Jerome Powell and the Fed, the market does not expect an interest rate cut next week. Fed Fund futures indicate a less than 3% chance of a cut, but there is a 60% chance of one in September.

Bears have been looking for a reversal from the index highs as more news hits the market, but that has not been the case, although earnings have not been all that great. The technical setup is very strong for a sell the news reaction, but perhaps it is too obvious to work right away.

According to Bloomberg: “Trading desks at firms including Goldman Sachs Group Inc. and Citadel Securities are telling clients to buy cheap hedges against potential losses in US stocks as a slew of risks loom over the market’s record advance.” 

The expectations for a pullback are very high, and when so many investors are leaning in one direction, it is less likely to occur.

Watch for some positioning moves on Friday, but there is little news flow to end the week.

At the time of publication, Rev Shark had no positions in any securities mentioned.