Weekly Trader's Outlook

If you read last week's blog you might recall that I had a "Slightly Bearish" forecast for this week, citing slowing technical momentum along with a potential 'sell on the news' reaction to Q2 earnings reports given the set-up. At the time of this writing the S&P 500 is up about 0.50% on the week and hit a fresh all-time intraday high (6,315) earlier today, so my forecast turned out to be wrong. We did see some "sell on the news" price action from the big bank earnings reports and with streaming giant Netflix, after reporting a solid "beat and raise" quarter. Whether this will be a theme that emerges for those stocks that have rallied substantially over the past couple months after they report earnings remains to be seen.

On the trade front, U.S. President Donald Trump threatened a 100% secondary tariff against Russia if President Vladimir Putin does not agree to a deal to end the Ukraine war in 50 days. Earlier today the Financial Times reported that Trump is planning to raise tariffs on the European Union to a minimum of 15-20% following weeks of negotiations over a possible framework deal.

Elsewhere, Nvidia rallied to fresh all-time highs this week after the chip maker said it plans to resume sales of its H20 AI chip to China after Nvidia CEO Jensen Huang met with President Trump. The news helped lift tech stocks in general as both the Nasdaq and PHLX Semiconductor Index (SOX) hit fresh all-time highs earlier this week.

Lastly, Markets were hit with some mid-week volatility following a report that President Trump was looking into firing Federal Reserve Chair Jerome Powell, citing a $2.5B renovation plan at the Federal Reserve as sufficient cause. Trump later stated that it is "highly unlikely" that he’ll fire Powell and markets, along with Treasury yields, subsequently recovered lost ground.

At the time of this writing (2:30 p.m. ET), all the major indices are trading slightly lower (DJI – 227, SPX – 6, COMPX – 2) after hitting fresh all-time highs earlier in the session. There has been some elevated intraday volatility today, likely because today is the standard monthly options expiration. Second Quarter earnings season is underway and so far, so good (+5% revenue growth and +10% EPS growth from the 58 S&P companies that have reported), but the post-earnings reactions for stocks that are trading near highs have mostly been lower, regardless of the results. However, it's still early, so we don't want to extrapolate too much from this week's price action. Next week will be a good test when we hear from a couple mega-cap tech companies (Alphabet and Tesla report on Wednesday), and some of the recent high-flyers (GEV, IBM, FIX, etc.). On the technical front, I'm still leaning cautious given the slowing momentum and bearish seasonality (more on this in the "Technical Take" section below). Therefore, my forecast for next week is "Slightly Bearish." I realize that the trend for stocks is bullish, and the pain trade is still likely higher, but I want to respect how far this rally has gone, coupled with some yellow flags on the charts that could be suggesting a higher probability for some mean reversion. What could challenge next week's outlook? I could be early interpreting the signs of the potential for some consolidation and stocks could just continue to "melt up."

Other Potential Market-Moving Catalysts:

Economic:

• Monday (7/21): Leading Indicators
• Tuesday (7/22): no reports
• Wednesday (7/23): EIA Crude Oil Inventories, Existing Home Sales, MBA Mortgage Applications Index
• Thursday (7/24): Continuing Claims, EIA Natural Gas Inventories, Initial Claims, New Home Sales, S&P Global US Manufacturing PMI, S&P Global US Services PMI
• Friday (7/25): Durable Orders

Earnings:

• Monday (7/21): Cleveland-Cliffs Inc. (CLF), Domino's Pizza Inc. (DPZ), NXP Semiconductor (NXPI), Roper Technologies (ROP), Ryanair Holding PLC (RYAAY), Verizon Communications (VZ)
• Tuesday (7/22): Capital One Financial Corp. (COF), Coca-Cola Co. (KO), Danaher Corp. (DHR), Intuitive Surgical Inc. (ISRG), Philip Morris International Inc. (PM), RTX Corp. (RTX), SAP SE (SAP), Texas Instruments (TXN)
• Wednesday (7/23): Alphabet Inc. (GOOGL), AT&T Inc. (T), Boston Scientific Corp. (BSX). GE Vernova Inc. (GEV), General Dynamics (GD), (PLD), International Business Machines Corp. (IBM), Tesla Inc. (TSLA), T-Mobile US Inc. (TMUS)
• Thursday (7/24): Blackstone Inc. (BX), Comfort Systems Inc. (FIX), Decker's Outdoor Corp. (DECK), Deutsche Bank (DB), Digital Realty Trust Inc. (DLR), Honeywell International Inc. (HON), Intel Corp. (INTC), Newmont Corp. (NEM), Union Pacific Corp. (UNP), Valero Energy Corp. (VLO)
• Friday (7/25): Aon PLC (AON), AutoNation Inc. (AN), Centene Corp. (CNC), Charter Communications Inc. (CHTR), HCA Healthcare Inc. (HCA), Phillips 66 (PSX)

There was a steady dose of economic data this week which was highlighted by cooler-than-expected monthly inflation data (CPI/PPI) and a stronger-than-expected Retail Sales report. In addition, Initial Claims hit the lowest levels since mid-April and inflation expectations declined within the University of Michigan Consumer Sentiment report. In sum, the data support the notion of a healthy economy. Here's the breakdown from this week's reports:

• Consumer Price Index (CPI): Headline increased 0.3% on a month-over-month (MoM) basis (above the +0.2% expected); Headline year-over-year (YoY) increased 2.7%, in-line with the +2.7% expected. Core CPI increased 0.2% MoM (in-line with estimates) while Core YoY increased 2.9% (also in-line with estimates).
• Producer Price Index (PPI): Headline came in at 0.0% on a month-over-month (MoM) basis (below the 0.2% expected); Headline year-over-year (YoY) increased 2.3% (below the +2.5% expected). Core PPI were unchanged MoM (below the +0.2% expected) while Core PPI YoY increased 2.6% (in-line with estimates), and the smallest YoY increase since July 2024.
• Retail Sales: Increased 0.6% in June, following a -0.9% drop in May, which was above the +0.1% economists had expected. This put the YoY gain at 3.9%. Retail Sales, excluding autos, rose 0.5%, which was above the +0.2% expected.
• Empire State Manufacturing: 5.5 vs. -10.0% expected
• University of Michigan Consumer Sentiment: Rose to 61.8 from 60.7 in May, which was well above the 61.5 estimate. One-year inflation expectations eased to 4.4% from 5.0% in the prior month, while five-year expectations dropped to 3.6% from 4.0%.
• Initial Jobless Claims: Were declined 7K to 221K versus last week's (upwardly revised) 228K, and below the 235K expected. Continuing Claims increased 2K from last week to match the cycle high of 1.956M, suggesting hiring sluggishness.
• The Atlanta Fed's GDPNow "nowcast" for Q2 GDP was revised down to 2.4% yesterday from 2.6% last Friday.

The treasury yield curve steepened slightly this week, and we saw some mid-week volatility following rumors of Trump wanting to fire Fed Chair Powell (though Trump subsequently stated he wouldn't). Yields on the 30-year crept above the 5.0% level on the report but have subsequently stabilized. Compared to last Friday, two-year Treasury yields declined ~3 basis points (3.86% vs. 3.89%), 10-year yields are unchanged (4.42% vs. 4.42%), while 30-year yields increased ~4 basis points (4.99% vs. 4.95%).

Expectations around potential rate cuts from the Fed were declined slightly this week, likely influenced by firm economic data. Per Bloomberg, expectations for a 25-basis point cut at the September Federal Open Market Committee declined to 64% vs. 70% last week, while the total 2025 expected 25-basis-point cuts dropped slightly to 1.85 from 2.01 on a week-over-week basis. 

The S&P 500 (SPX) continued to gradually melt higher this week, which was largely fueled by large-cap/tech companies (the S&P equal weight has been exhibiting relative weakness to the market-cap weighted S&P). New all-time highs are bullish, the long-term bullish trend is intact, but as I referenced last week, the new price highs int eh SPX are being met with correspondingly lower RSI levels, which is a negative divergence. This suggests momentum is slowing, and it could be signaling a near-term sentiment shift. Stocks are also moving into more bearish seasonality so perhaps some near-term caution is warranted given the current set-up.

Near-term technical translation: slightly bearish

Like I mentioned last week, the technical snapshot of the Nasdaq 100 (NDX) looks like the SPX, meaning it is crawling to new highs on fading momentum. Next week well get a couple of mega-cap tech earnings reports (GOOGL and TSLA report Wednesday), so this will be a good test of the bull's resilience. Netflix delivered a "beat and raise" quarter and the stock is down nearly 5% today, so this could indicate a "sell on the news" tendency post-earnings, but it's too early to say right now. In any event, I still see a cautious technical set-up on the NDX next week.

Near-term technical translation: slightly bearish

There were positive regulatory developments for the crypto industry this week. The three crypto-related bills, the GENIUS Act, which outlines a regulatory framework for stablecoins, the Anti-CBDC Surveillance State Act, and the Digital Asset Market Clarity (CLARITY) Act, all advanced. Trump is expected to sign the GENIUS Act into law today and the CLARITY Act and Anti-CBDC Acts were passed by the House and are now headed to the Senate. Bitcoin hit a fresh all-time high ($122,838) on Tuesday and Ethereum traded above $3,600 this week, the highest levels since December.

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP) and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, although stocks grinded to fresh highs this week market breadth contracted, so there was some negative divergence. This suggests a more concentrated leadership, meaning that large caps likely pulled more weight during this week's move higher. On a week-over-week basis, the SPX (white line) breadth dropped to 60.92% from 64.60%, the CCMP (blue line) moved down to 47.42% from 48.60%, and the RTY (red line) eased to 51.16% from 53.96%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average or new highs vs. new lows.

This Week's Notable 52-week Highs (129 today): British American Tobacco Industries Inc. (BTI - $0.01 to $51.31), Coinbase Global (COIN + $31.92 to $442.67), GE Aerospace Inc. (GE + $7.05 to $267.33), Nvidia Corp. (NVDA + $0.33 to $173.33), Palantir Technologies Inc. (PLTR - $0.71 to $153.28), Roblox Corp. (RBLX + $0.84 to $123.01)

This Week's Notable 52-week Lows (15 today): Cable One Inc. (CABO + $0.27 to $124.12), Conagra Brands Inc. (CAG + $0.12 to $19.09), Gartner Inc. (IT - $3.86 to $357.55), General Mills Inc. (GIS + $0.35 to $50.64), Molina Healthcare Inc. (MOH - $9.32 to $194.92), Waters Corp. (WAT - $5.63 to $291.29)