The Dow Jones Index has jumped by nearly 10% this year and is now hovering near its all-time high. It has jumped by 19% in the last 12 months and 190% in the last decade. This index will have some volatility next week as traders react to corporate earnings, US consumer inflation, and any new developments on the US-Iran war.
Dow Jones to React to US Earnings Season
The Dow Jones and other top indices like the S&P 500 and Nasdaq 100 will react to the start of the earnings season, which will officially start on Tuesday. Five banks, including JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC) will publish their earnings on that day.
Morgan Stanley, Bank of New York, and PNC will report their earnings the following day. Analysts expect these banks to deliver strong results, supported by relatively high interest rates and robust activity in the trading and investment banking businesses.
A FactSet (NYSE:FDS) report shows that Wall Street analysts predict that companies in the S&P 500 Index will have an earnings growth of 23.6%. If this happens, it will mark the second consecutive quarter of earnings growth of 20%. In most cases, the real growth rate is usually much higher than what analysts expect.
US CPI Data to Give Hints on Fed’s Next Action
The Dow Jones Index will react to Tuesday’s US consumer price index report. Economists expect the data to show that the headline CPI dropped slightly in June as energy prices fell. The headline CPI is expected to come in at minus 0.1% on a MoM and at 4% on a YoY.
These numbers will come nearly two weeks after the US published a weak nonfarm payrolls report. This report showed that the economy added just 57,000 jobs in June, missing analysts’ estimate of 114k.
A higher inflation rate than expected will raise the possibility of a more hawkish Federal Reserve. This explains why US bond yields have risen, with the ten-year remaining above 4.56%.
US-Iran Tensions Remain
The Dow Jones Index will also be volatile because of the US-Iran tensions. In a statement this week, President Donald Trump said that the ceasefire was over as the US and Iran exchanged fire.
Trump also warned that the US would destroy Iran if it killed or attempted to kill him. In a statement on Saturday, Mojtaba Khamenei vowed that Iran would avenge the killing of his father.
Signs of escalation will lead to higher crude oil prices, which may have a negative impact on US stocks.
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