Dow looks to extend winning streak as central-bank decisions and raft of earnings loom

The S&P 500, meanwhile, sits less than 6% away from its record finish set on Jan. 3, 2022.

The surge reflects hopes that cooling inflation will allow central banks to soon stop their rate rise campaigns and that any economic downturn caused by the monetary tightening will not impact corporate profits too badly.

Key Words: Morgan Stanley credits ‘Bidenomics’ in lifting its U.S. economic-growth outlook

To that end, the coming week will have plenty for traders to chew on, with the top three central banks delivering rate decisions and a slew of U.S. companies presenting their results.

See: Everyone thinks the Fed’s rate hike this week will be the final one — except the Fed

The Federal Reserve is expected on Wednesday to raise borrowing costs by 25 basis points to a range of 5.25% to 5.50%, and investors will be eager to hear whether that may be the last for the cycle. The Bank of Japan on Friday should leave rates unchanged but may say something about removing elements of its ultraloose policy, such as buying bonds to suppress yields.

Read: Stocks are making a run for record territory. Will the Fed end its rate hikes anyway?

On Thursday, the European Central Bank will deliver its decision. Another increase in borrowing costs is expected, but the ECB’s hawkishness may be tempered by reports released Monday that showed economic activity in the eurozone slumped to an eight-month low in July.

Earnings season remains in full swing, with several tech heavyweights due to report in the week ahead. Alphabet
GOOG,
+1.91%
and Microsoft
MSFT,
+0.54%
will present their numbers on Tuesday, Meta
META,
+0.28%
on Wednesday and Intel
INTC,
+0.60%
on Thursday.

Earnings Preview: With Microsoft, Meta and Alphabet earnings hanging on AI, more investors are asking: ‘How are you going to pay for that?’

“The debate around how much the economy needs to be zapped with higher rates to quash inflation properly is still raging on. While the expectation is that interest rates will need to go higher still, that’s led to some stagnation in the U.S. markets as we kick off the week, following strong gains last week,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

“Investors are holding their breath ahead of key tech earnings, which among other things, will paint a picture for how advertising demand is shaping up, as well as how the league tables are looking for the AI race. Market volatility, especially from the Nasdaq Composite, is likely to be coming down the line,” Lund-Yates added.

The U.S. economy grew in July at the slowest pace in five months, S&P surveys of purchasing managers showed, and pointed to weaker conditions later in the year.

The S&P Flash U.S. services-sector index fell to 52.4 from 54.4 in the prior month. That’s the lowest reading since March. The S&P U.S. manufacturing sector index, meanwhile, rose to 49.0 from 46.3. A reading above 50 indicates an expansion in activity, while a reading below that level signals contraction.

The readings showed elevated cost pressures continued to be led by the services sector. However, manufacturers saw a renewed rise in input prices, and services firms reported a slower uptick in operating expenses, Standard & Poor’s said.

“July is seeing an unwelcome combination of slower economic growth, weaker job creation, gloomier business confidence and sticky inflation,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Companies in focus

• Shares of Domino’s Pizza Inc.
  DPZ,
  +0.85%
  rose 0.9% after the pizza chain reported second-quarter profit that topped expectations but revenue that surprisingly declined, as market-basket pricing to stores fell.

• Shares of AMC Entertainment Holdings Inc.
  AMC,
  +17.61%
  rose 12% after a Delaware judge on Friday blocked the company’s plan to convert its APE preferred units into stock. The theater chain also reported its busiest weekend since 2019, boosted by the blockbuster openings of “Barbie” and “Oppenheimer.”

• Tesla Inc.
  TSLA,
  +0.72%
  shares fell 1.5% after UBS recommended investors stop buying, saying prices already fully reflect strong demand, and then some.