The S&P 500 and Dow Jones have traded sideways for the past few weeks, hovering just below their record highs. Both indexes have shown only muted reactions to recent catalysts, including corporate earnings and last week’s Federal Reserve rate decision. This article covers the key stock market news to watch this week.
US Stocks to React to Trump-Xi Meeting
President Donald Trump will host Xi Jinping, his Chinese counterpart, this week. The two sides will discuss some important issues, including artificial intelligence (AI), trade, and the ongoing wars between the US and Iran and between Ukraine and Russia.
This is an important meeting that may have some major implications on the stock market. For example, Xi Jinping may make some announcements on the 200-jet Boeing (NYSE:BA) order that was discussed during Trump’s visit to Beijing. A breakthrough on the ongoing US-Iran war may also boost the stock market.
The two sides may also discuss the AI industry as safety issues remain. Also, the discussion may include the ability for Nvidia (NASDAQ:NVDA) to ship more chips to China.
Key Corporate Earnings This Week
The S&P 500 and Dow Jones will react mildly to some important earnings that will come out this week. Costco Wholesale (NASDAQ:COST), the giant American retail group, will be the main company to watch when it releases its results on Thursday. These numbers will provide more information on the health of US consumers.
The other top companies that will release their numbers this week are Darden Restaurant, TD Synnex, AutoZone, Cintas, Paychex, and General Mills. While all these companies are big ones, their impact on the stock market in general will be limited.
Instead, investors are waiting for the next earnings season to start. A FactSet (NYSE:FDS) report estimates that third-quarter earnings growth will be nearly 30%.
Bond Market Jitters and US Macro Data
The Dow Jones and S&P 500 indices reacted mildly to last week’s Federal Reserve decision, in which officials decided to hike interest rates for the first time this year. Officials also hinted that they will hike again this year to combat the rising inflation.
The stock market will react to any new developments in the bond market. Bond yields have been in a strong upward trend this month, with the ten-year hovering above 5%. A continued surge in bond yields will negatively impact the stock market.
In line with this, there will be some notable macro numbers from the US, including the flash manufacturing and services PMI and durable goods data.
US-Iran, Saudi Arabia-Houthi, Russia-Ukraine Wars
Geopolitics will have an impact on the US stock market. There are signs of escalation across different theatres. Ukraine bombarded Russia with the biggest drone strikes, while Houthis attacked Riyadh Airport. Iran continued to attack ships attempting to cross the Strait of Hormuz. President Trump also ended his trip to Camp David early.
An escalation will likely lead to higher crude oil prices, which will lead to higher inflation. A higher inflation environment, on the other hand, will have an impact on the Federal Reserve interest rates.
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