Earnings, CPI, and Iran: U.S. Stocks Face a Gauntlet Next Week

As of the close on Friday, July 10, U.S. markets were in a holding pattern. According to Reuters, a dense calendar of economic data, corporate earnings, and Middle East developments next week will test a stock market hovering near record highs but simmering with internal tension. The S&P 500 was on track for its second straight weekly gain through Thursday, up 10% YTD and roughly 1% below its all-time closing high from early June.^[Kitco] The week’s gains overcame sharp swings in market-leading semiconductor stocks and renewed U.S.-Iran tensions, which pushed war-related risks and the specter of surging energy prices back to the forefront for investors.^[Kitco] On Friday, stocks edged higher, and SK Hynix closed its first day of U.S. trading down 0.27%.^[Barron's]

Inflation Data and Rate Path in Focus

The most anticipated economic release next week is the June Consumer Price Index (CPI), due Tuesday (July 14). According to Reuters, the inflation print could recalibrate market expectations for interest rates.^[Kitco] Core CPI—which strips out energy—will be the key focus, as investors watch for signs that this year’s oil price gains are feeding into broader inflation.^[Kitco]

“If we get a hotter inflation print, or signs that inflation will stay elevated in the coming months, it could raise the odds of a rate hike before year-end,” said Anthony Saglimbene, chief market strategist at Ameriprise.^[Kitco] Another inflation gauge—the Producer Price Index (PPI)—follows a day after the CPI report. Monthly retail sales data on Thursday (July 16) will offer a window into consumer spending strength.^[Kitco]

Higher rates raise borrowing costs for consumers and businesses, pressuring stocks. Following the Fed’s surprisingly hawkish meeting last month—the first under new Chair Kevin Warsh—investors have increased bets on an imminent rate hike. Minutes from that meeting, released this week, showed policymakers growing more concerned about inflation. Warsh himself is expected to deliver his first monetary policy testimony before Congress next week.^[Kitco]

Big Bank Earnings Kick Off

Next week, major U.S. banks lead off Q2 earnings, setting the tone for what is expected to be a strong corporate reporting season. JPMorgan (JPM.N) and Goldman Sachs (GS.N) are among the key names reporting on Tuesday (July 14).^[Kitco] Bank results could offer insights into consumer health through credit card data, as well as broader credit trends.^[Kitco]

“If you see big banks report healthy earnings and guidance next week, it suggests the overall environment for the economy, companies, and consumers held up relatively well in the second quarter,” added Ameriprise’s Saglimbene.^[Kitco] Beyond banks, Delta Air Lines (DAL) also reports next week, with CEO Ed Bastian set to appear live on CNBC’s “Squawk Box.”^[CNBC] Delta shares have rallied 31% over the past three months but are down 7% from their July 2 high.^[CNBC]

Geopolitics and Energy Price Risk Reignite

Investors’ relatively brief conviction that the Middle East conflict would remain contained, combined with a strong Q1 earnings season, helped lift stocks in recent months. This week, however, oil prices rose on renewed fears of attacks on shipping and global supply. Brent crude last traded around $76 a barrel, well below the $100 level hit earlier this year—a threshold markets generally view as more alarming.^[Kitco]

Still, investors say they will be watching developments in Iran closely, including impacts on shipping and any widening of the regional war. “When the Iran situation is this volatile, it’s a very difficult environment to make strategic investment decisions,” said King Lip, chief strategist at BakerAvenue Wealth Management.^[Kitco]

The recent pullback in oil prices could reduce the urgency for global central banks to raise rates to control inflation. For the Fed, “the oil price trajectory may determine the degree of urgency for the next rate hike—whether it comes in September or October,” Macquarie strategists wrote in a note Thursday.^[Kitco]

Markets Face Multiple Cross-Currents

“You’ve got multiple cross-currents from geopolitical headlines, the start of earnings season, the upcoming CPI data, and some skepticism around the AI trade,” summed up Michael Reynolds, vice president of investment strategy at Glenmede. “It looks like a lot of factors all hitting at once.”^[Kitco]

CNBC’s “The Week Ahead” program also highlighted next week’s focus on inflation data and the start of big bank earnings season.^[CNBC] Meanwhile, SK Hynix, the Korean chipmaker, made its U.S. market debut on Friday (July 10), with shares closing down 0.27%.^[Barron's] CNBC’s “Stocks @ Night” newsletter had previously flagged SK Hynix’s upcoming U.S. listing.^[CNBC]

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