Earnings, inflation, and the trade war — it's about to be a big week for markets
Major indexes dipped on Monday, but the reaction to the latest tariff drama has been light.
Bank earnings, inflation, and a week of crypto talks in Congress are some of what market's are eyeing.
The stock market is heading into a week chock-full of possible catalysts.
US stocks continued to dip slightly from record highs notched last Thursday, but the move down was fairly tame even as traders assessed President Donald Trump's latest tariff threats over the weekend.
Here's where US indexes stood shortly after the 9:30 a.m. opening bell on Monday:
S&P 500: 6,252.96, down 0.11%
Dow Jones Industrial Average: 44,400.52, up 0.07% (+29 points)
Nasdaq composite: 20,565.99, down 0.09%
Here are the big things on investors' radar this week.
Earnings
Earnings season kicks off in earnest this week with results from the big banks.
Large bank earnings will probably be "solid," thanks to overall strength in the US economy and factors that have helped bank trading desks, according to Glen Smith, the chief investment officer at GDS Wealth Management.
"The big question for markets in the coming weeks is if earnings, which are expected to be solid, can overshadow the tariff issues that are still there in the background," Smith said.
Inflation
Investors are waiting on fresh inflation data, which could change the outlook for Fed rate cuts this year.
The June consumer price index is expected to be released by the Labor Department on Tuesday, which should give markets fresh insight into how tariffs are affecting the US economy. Economists expect consumer inflation to climb 2.6% in June, hotter than last month's 2.4% yearly increase.
Economists have warned that tariffs can be inflationary, as companies facing higher import costs could pass the expenses on to consumers.
Markets, meanwhile, are pricing in the near certainty that the Fed will leave rates unchanged at its July policy meeting, according to the CME FedWatch tool.
"The June CPI is likely the first inflation report that noticeably reflects higher prices from tariffs," Smith added.
Trump's trade war
President Donald Trump's trade war has kept markets on edge since he announced his Liberation Day tariffs in April, but the market reaction to the latest salvo has been relative tame.
The S&P 500 notched a record high last week even as the president threatened more than 20 countries with tariffs starting on August 1.
Investors seem to betting on the TACO trade, an acronym standing for Trump Always Chickens Out, in reference to Trump's habit of backing down from his most aggressive policy proposals.
But some have argued that the market's insistence that Trump will always pivot will ultimately backfire. GMO's Ben Inker told BI last week that a tepid reaction from the market will only embolden Trump to push on with his trade war.
The current array of tariffs currently hovers between a "Middle Case" and a "Worse Case" scenario, Ronald Temple, the chief market strategist at Lazard, wrote in a note.
The market's reaction to the latest tariff increases confirms that investors aren't "out of the woods" yet, GDS's Smith added.
"For investors who missed the opportunity to put new money to work when valuations were much lower in April, it's best to remain on the lookout for any pullbacks and be ready to add new money when the opportunity arises," he added.
Crypto rally
Monday marks the start of crypto week, with lawmakers expected to debate key pieces of crypto-related legislation.
The GENIUS Act: A Senate bill that provides a regulatory framework for issuing stablecoins.
The CLARITY Act: A bill that allows regulators to categorize cryptocurrencies as either a commodity, a security, or a currency.
The Anti-CBDC Surveillance State Act: A House bill that bans the Federal Reserve from issuing a central bank digital currency.
Bitcoin continued its record-setting rally on Monday, topping $122,000 after notching a series of fresh records last week. The crypto traded as high as 122,700 early Monday.
"Bitcoin continues to defy the doubters and has now shot past $120k, driven by a combination of renewed risk appetite and growing institutional demand. Confidence is clearly returning to the markets, with investors rotating back into high-beta assets like crypto," Harry Mills, the director at Oku Markets, wrote in a note.
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