Communications services, which includes internet names, was the best performing sector in the past week with a 3.2% gain. Tech was also strong, up 2.8%. Consumer discretionary was also a top sector, up 2.9%. Cyclical industrials and material lagged with fractional gains, and energy was slightly lower.
Scott Redler, chief strategic officer with T3Live.com, said the Big Tech names like Apple and Microsoft are already doing well ahead of earnings, so it will be important to see how they trade.
“Some things are priced for perfection and some aren’t,” he said. “Microsoft is already at an all-time high. It’s priced for perfection. It will be interesting to see if Apple can hold and stay above $150.” Apple closed at $148.56 per share Friday.
Fed ‘taper talk’
Ben Jeffery, U.S. rates strategist at BMO, said Treasury yields could find a catalyst in the Fed. He expects the 10-year to begin moving down again, and says it could possibly touch a low of 1.10%. The 10-year was at 1.28% Friday afternoon.
Strategists do not expect to see much new in the Federal Reserve’s statement. They await comments from Fed Chairman Jerome Powell for guidance on the central bank’s move toward tapering back its quantitative easing program.
The Fed is expected to announce that it is officially talking about winding down the program well before it actually starts. Many Fed watchers believe that guidance will come in late August, at the central bank’s Jackson Hole symposium, or later in the fall.
“I think it will be interesting to see how dovish Powell tries to be with the delta variant risk and concerns about that,” said Jeffery.
Luke Tilley, chief economist at Wilmington Trust, does not expect much new from Powell this week. “I’m really targeting Jackson Hole as the most likely candidate for a pivot point for policy and communication,” he said. “However, next week’s meeting could set the stage for that with some statements that point us toward some improvement in the economy. They’ll be highlighting the new risks of the delta variant, and that’s the risk we think they point out.”
Slowing the bond program is important since it is a signal that the Fed is on the road to reversing its easy policies, including ultimately its zero policy rate. Tilley said the central bank will probably take a year to wind down its $120 billion a month in bond purchases, and then the door is open to rate hikes.
Investors will also be watching second quarter GDP to see how much strength there is in the economy.
According to CNBC/Moody’s Analytics rapid update, a survey of economists expects second quarter growth to grow by an average 9.7%. It is expected to be the peak period for growth, and the average forecast for third quarter growth is 8.3%.
Tilley said he expects growth for the 2021 year of 7% to 7.5%.
Week ahead calendar
Earnings: Tesla, Lockheed Martin, F5 Networks, Check Point Software, Hasbro, LVMH, Otis Worldwide, Ameriprise
10:00 a.m. New home sales
Fed begins 2-day meeting
Earnings: Apple, Alphabet, Microsoft, 3M, Visa, Advanced Micro Devices, General Electric, Boston Scientific, PulteGroup, Raytheon, JetBlue, Archer Daniels Midland, Chubb, Mondelez, Starbucks, Hawaiian Holdings, Waste Management, Corning, Sherwin-Williams, UPS, Stanley Black and Decker, Teradyne, Cheesecake Factory
8:30 a.m. Durable goods
9:00 a.m. FHFA home prices
9:00 a.m. Case-Shiller home prices
10:00 a.m. Consumer confidence
Earnings: Boeing, Facebook, Pfizer, Ford, Qualcomm, McDonald’s, Bristol-Myers Squibb, PayPal, General Dynamics, GlaxoSmithKline, Norfolk Southern, Automatic Data, CME Group, Garmin, Moody’s, Steve Madden, Penske Auto Group, Hess, Aflac, Canadian Pacific Railway, Fortune Brands, Samsung
8:30 a.m. Advance economic indicators
2:00 p.m. Fed statement
2:30 p.m. Fed Chairman Jerome Powell briefing
Earnings: Amazon, Merck, Comcast, Airbus, Anheuser-Busch InBev, MasterCard, Intercontinental Exchange, AstraZeneca, Hilton Worldwide, Northrop Grumman, Altria, Hershey, Yum Brands, American Tower, Gilead Sciences, Pinterest, Deckers Outdoors, First Solar, Beazer Homes, U.S. Steel, Molson Coors Brewing, Southern Co., Tempur Sealy, Textron, Nielsen, Valero Energy, Martin Marietta Materials
8:30 a.m. Unemployment claims
8:30 a.m. Q2 GDP
10:00 a.m. Pending home sales
Earnings: Caterpillar, Chevron, ExxonMobil, Procter & Gamble, Colgate-Palmolive, AbbVie, Booz Allen, Lazard, Church & Dwight, Johnson Controls, Illinois Tool Works, Cabot Oil & Gas, CBOE Global Markets
8:30 a.m. Personal consumption expenditures
8:30 a.m. Employment cost index Q2
9:00 a.m. St. Louis Fed President James Bullard
9:45 a.m. Chicago PMI
10:00 a.m. Consumer sentiment
8:30 p.m. Fed Governor Lael Brainard