Stocks ended a turbulent week on Wall Street, with traders looking past a major global outage to focus on the upcoming tech earnings season. Despite the recent challenges, the S&P 500 remained relatively stable, although it was still on track for its worst week since April. The decline in stock prices was driven by investors adjusting their portfolios, moving away from this year’s winners and towards 2024 laggards in anticipation of a broader bull market beyond big tech due to Federal Reserve rate cuts.
Glen Smith, a financial expert at GDS Wealth Management, highlighted the importance of the next week in determining the short-term direction of stock earnings. He emphasized that strong tech earnings combined with easing inflation could potentially reverse the recent market weakness and trigger a new upward trend in stock prices.
The stock market was also affected by a cybersecurity incident that disrupted computer systems at businesses and public services after a failed update of a widely used program by Microsoft Corp. While the fault was quickly identified and fixed, the incident raised concerns about cybersecurity vulnerabilities in the digital age.
Despite these challenges, investors continued to show confidence in U.S. equities, especially as expectations grew for a September rate cut by the Federal Reserve and a potential re-election of President Donald Trump. According to Bank of America Corp. strategists, U.S. equity funds saw a significant inflow of about $45 billion, with both small-cap and large-cap funds receiving substantial investments.
Looking ahead, there are concerns about a potential setback for equities this summer, with Goldman Sachs Group Inc. strategists warning of a possible correction in the market. They cited factors such as weaker growth data, dovish central bank expectations, and rising policy uncertainty leading up to the U.S. elections as reasons for a possible downturn.
In terms of corporate news, several notable developments emerged in the market:
– American Express Co. announced plans to increase marketing spending following a slowdown in billings growth on its credit cards.
– Eli Lilly & Co.’s Mounjaro received regulatory approval in China, intensifying competition in the obesity treatment market.
– Hawaiian Electric Industries Inc. and other companies tentatively agreed to pay over $4 billion to settle lawsuits related to wildfires in Maui.
– Netflix Inc. continued to dominate the streaming industry, adding millions of new customers in the second quarter and raising sales and profit margin forecasts.
Overall, the stock market remained resilient despite the challenges it faced during the week. As investors prepare for the tech earnings season and navigate geopolitical and economic uncertainties, the market is poised for potential shifts in the coming weeks. The interplay of corporate developments, economic indicators, and policy decisions will continue to shape the trajectory of stock prices in the near term.