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Following yet another record close for the S&P 500 and the Nasdaq Composite, both market barometers remain in overbought territory ahead of Fed Chair Powell’s semiannual address to Congress that kicks off at 10 AM ET later this morning. Those hoping for Powell to break something new on the monetary policy front, odds are, will be disappointed. More likely the Fed chief will acknowledge recent data that points to the economy slowing and inflation improving, reiterating the Fed wants to see more data before making its first move to cut rates. With the June CPI and PPI reports out later this week, readers should not expect Powell to comment on the two rate cuts the market increasingly sees for this year depicted in the CME FedWatch Tool.
While folks wait for Powell and his comments, the NFIB Small Business Optimism Index for June reached its highest level of the year at 91.5. The takeaway from the report - “Increasing compensation costs has led to higher prices all around. Meanwhile, no relief from inflation is in sight for small business owners as they prepare for the uncertain months ahead.” On the jobs front, 37% of all small business owners reported job openings they could not fill in their current period, down five points from May. Of the 60% of owners hiring or trying to hire in June, 85% reported few or no qualified applicants for the positions they were trying to fill.
Between now and our next edition of Thematic Signals on Thursday, no market-moving earnings reports are expected, but investors will be on the lookout for earnings pre-announcements, both bad and good. Yesterday’s positive June quarter pre-announcement from Corning (GLW) was a positive data point for generative AI as well as our Artificial Intelligence and Digital Infrastructure models.
Tomorrow brings Samsung’s Unpacked 2024 event, which is expected to showcase the company’s latest foldable smartphones, its Galaxy AI, and refreshed wearables. Chair Powell will also return to Capitol Hill tomorrow continuing two days of back-to-back testimony. Alongside those comments, several other Fed heads will be making the rounds but the market will correctly focus on the Fed chief’s remarks.
Because the market is overbought and the S&P 500’s P/E valuation is stretched, we are seeing market strategists at bulge bracket firms adopt a more cautious tone for the next several weeks.
Related: Mid-Year Checkpoint: What Are the Risks for the Second Half?