Standing at the Crossroads
This week’s FOMC meeting, economic data and earnings reports could determine the stock market’s trajectory over the remaining weeks of summer
Key Takeaways
- The Fed’s FOMC interest rate decision on Wednesday will carry significant weight this week. Though expectations are widely held for a 0.25% rate hike investors will pay particular attention to comments by the Fed Chair at the press conference that follows the decision.
- This week a diverse array of widely followed companies in the S&P 500 should carry the direction of the markets along with a busy calendar of key economic data reports.
- Last week markets showed further broadening of the bull market’s breadth as sectors that had lagged all year led last week’s rally.
- With 18% of the S&P 500 having reported results five sectors are showing double-digit earnings growth. We say “so far so good.”

This week will offer plenty of opportunity to test the stock market rally that began on October 12 last year and has carried forth from the beginning of this year through last Friday. Traders will be seeking to gain further insight into the direction the markets are likely to take from here through the rest of the summer with a hefty calendar of economic data scheduled for release over the course of this week. In addition to that 165 S&P 500 companies are scheduled to report Q2 results this week including bellwether names across sectors that include information technology, industrials, communications services, consumer discretionary, staples and energy.
At mid-week the Federal Reserve’s FOMC interest rate decision will be announced. While a hike of a quarter point (0.25%) to a band of 5.25–5.50% is widely expected and reflected in Fed Funds futures, comments from Fed Chair Jerome Powell at the press conference after the FOMC meeting concludes will be closely followed for any change of tone or viewpoint as to how policy makers view their progress in reducing inflation and how much longer Fed officials might expect to continue raising rates.
In our view the Federal Reserve has shown that its policy actions have been effective at curbing inflation from 40-year high levels in March of last year when the central bank started raising rates.
With 18% (87) of the S&P 500’s member companies having thus far reported, it’s still too early to determine how the Q2 earnings season will turn out. That said, in our view “so far so good” with five sectors showing positive double-digit earnings growth (energy, industrials, consumer discretionary, communications services and real estate), three sectors posting positive single digit earnings growth (consumer staples, health care and financials), and two sectors delivering double digit negative earnings growth (materials and information technology). Utilities firms have yet to report results.
Among the key economic reports to be released this week we expect that data on manufacturing and services, home prices, and the consumer will give direction to market sentiment throughout the week. Toward the end of the week, GDP data on Thursday and the PCE deflator (among the Federal Reserve’s favorite inflation gauges) are likely along with earnings results to influence how stocks and bonds end the week.
With the S&P 500 last Friday just 5.25% shy of its alltime high bulls, bears and skeptics are on edge considering how accurate or inaccurate their projections have been thus far in 2023.
In our view the Federal Reserve has shown that its policy actions have been effective at curbing inflation from 40-year high levels in March of last year when the central bank started raising rates. Now with ten rate hikes and a “skip” as of last month under its belt the question is how long a period of time it will take and how many more rate hikes will be necessary to reach the Fed’s goal of 2% inflation. With June’s headline CPI inflation rate at 3% and the core CPI (ex food and energy) still somewhat elevated at 4.8% we’d say we’re not “out of the woods” yet but it looks like we’re getting close.
We remain highly constructive on equities on expectations that economic fundamentals are likely to remain resilient if not robust in this period of significant transition tied to monetary policy. Corporations, the consumer and labor continue to reflect in our view resilience characteristic with a recovery process from a period of crisis and great uncertainty into a period of sustainable economic growth.

John Stoltzfus
Title:Chief Investment Strategist, Oppenheimer Asset Management Inc.
John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.
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