Strong Start to US Earnings season

The US stock market demonstrated mixed but generally resilient performance last week amid escalating tariff concerns, the start of earnings season, and key economic data releases.

Trade Policy and Market Impact: President Trump’s push for higher tariffs on the European Union and other countries created significant trade uncertainty. However, markets found some relief in the extended negotiation period, which runs through August 1 before further tariff actions are implemented.

Market Performance: The S&P 500 and Nasdaq reached new all-time highs, gaining approximately 0.5% and 1.4%, respectively, for the week. The Dow Jones Industrial Average closed essentially flat. Technology stocks drove much of the Nasdaq’s outperformance, while broader market strength reflected solid corporate earnings and robust economic fundamentals.

Economic Data Several economic indicators supported positive investor sentiment. Housing starts rebounded, retail sales continued to show strength, and consumer sentiment improved modestly. These metrics reinforced the underlying health of the US consumer economy. Notably, inflation expectations moderated, with year-ahead forecasts declining to 5% in June from elevated levels earlier in the year.

Inflation Trends June inflation data revealed a modest uptick, with the Consumer Price Index rising 2.7% year-over-year. While higher tariffs began impacting specific categories, overall price pressures remained contained. The Producer Price Index for June came in cooler than expected, reinforcing market expectations that the Federal Reserve may consider rate cuts later this year, despite emerging tariff-related price pressures.

Corporate Earnings The second-quarter earnings season commenced with analysts projecting 4.6-4.8% year-over-year earnings growth for S&P 500 companies—the slowest pace since late 2023. While several companies exceeded estimates, including Netflix, Charles Schwab, and Chevron, investor reactions remained cautious, reflecting tempered growth expectations and ongoing uncertainties related to tariffs.

The banking sector stood out with robust results. The six largest US banks—JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, and Wells Fargo—all delivered second-quarter profits that surpassed analyst forecasts.

Trade policy uncertainty continues to weigh on market sentiment as investors await clarity on the administration’s tariff strategy beyond the August 1 deadline. The combination of solid economic fundamentals and corporate earnings provides support, though growth expectations remain modest given the evolving trade landscape.

Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest. To get any error corrected, please write to content@hdfcsec.com.

Source: HDFC Securities Prime Research