WITH earnings season winding down and the employment report out of the way, the US stock market is likely to shift into a lower gear this week.
The earnings season so far has been largely positive with more than half of the companies that have reported beating estimates. But cuts in outlooks from a number of bellwethers, including Intel and Caterpillar, mainly due to increasing concerns over China’s growth, have raised fears about the third and fourth quarters.
The market is also likely to trade sideways this week after the Dow and the S&P 500 hit record closing highs for a second day on Friday.
Both the Dow and the S&P 500 are up more than 19 per cent this year.
The market will be closely watching remarks by US Federal Reserve policymakers this week for more clues on when the US central bank might begin to reduce bond-buying stimulus, despite mixed signals from the jobs market.
Tomorrow, the president of the Chicago Federal Reserve Bank, Charles Evans, is scheduled to speak at a press breakfast, while Richard Fisher, head of the Dallas Federal Reserve Bank, is to deliver a speech on the economy today.
Among companies due to report earnings this week, CVS Caremark posts second-quarter results tomorrow. McDonald’s will report July restaurant sales on Thursday. Also on Thursday, Dean Foods, the top US dairy company, posts results.
In economic news, weekly jobless claims on Thursday could offer clues about the labour market conditions following Friday’s mixed jobs report. The Institute for Supply Management (ISM) report on the services sector is due today and June trade data is expected tomorrow.