Wall Street Week Ahead: Industrial sector's gains to be tested as earnings ramp up
S&P 500 industrials, which include aerospace companies, electrical equipment and machinery makers, transportation firms and building products companies, have gained 15% so far in 2025. That's the best year-to-date performance of the S&P 500's 11 sectors and more than double the gain of the overall index.
Momentum for the industrials sector and the broader market will be in focus with a heavy upcoming week of second-quarter earnings, which includes reports from more than one-fifth of the S&P 500, led by Alphabet and Tesla, the first of the 'Magnificent Seven' megacap tech and growth companies to report.
The S&P 500 has surged 26% since April, as investors shook off fears about a recession which had stemmed from President Donald Trump's 'Liberation Day' tariff announcement.
This earnings season 'seems to be especially important because of the rebound that the market has had,' said Chuck Carlson, chief executive officer at Horizon Investment Services. 'I would think that that has built in a fair amount of optimism in terms of earnings.'
A number of industrials will be in the earnings spotlight as well.
Aerospace and defense stocks have boosted the sector's performance this year, driven by heightened geopolitical tensions in the Middle East and Ukraine and fresh spending commitments by Germany and other nations.
The S&P 500 aerospace and defense industry group has surged 30% this year. Defense companies to report in the coming week include RTX, Lockheed Martin and General Dynamics.
GE Aerospace, whose shares have soared about 55% this year, raised its 2025 profit forecast on Thursday.
Another industrial company spun off from legacy General Electric last year, GE Vernova, has seen its shares skyrocket over 70% this year, making it the best-performing industrial sector stock. The power equipment maker's results are due Wednesday.
The push for reshoring infrastructure and expansion of artificial intelligence, which has lifted demand for cooling systems and factory automation, are two themes that have supported a number of stocks in the industry, including Eaton and Rockwell Automation, said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.
Another stock that has supported the industrial sector this year: Ride-hailing giant Uber, whose shares are up roughly 50%.
'Unlike many non-Tech groups, there are a lot of solid stories here that don't rely on macro forces to deliver solid forward returns,' Nicholas Colas, co-founder of DataTrek Research, said in a note on Wednesday. Large cap industrials still look attractive despite the group's recent run, Colas said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
3 hours ago
- Business Recorder
US trade gap skids to 2-year low; tariffs exert pressure on service sector
The U.S. trade deficit narrowed in June on a sharp drop in consumer goods imports, and the trade gap with China shrank to its lowest in more than 21 years, the latest evidence of the imprint on global commerce President Donald Trump is making with sweeping tariffs on imported goods. Trump's tariffs are leaving their mark on the U.S. economy beyond trade, as a measure of activity in the vast services sector hit stall-speed in July, with businesses saying the swarm of new import taxes is driving up costs and making business planning more difficult. The overall trade gap narrowed 16.0% in June to $60.2 billion, the Commerce Department's Bureau of Economic Analysis said on Tuesday. Days after reporting that the goods trade deficit tumbled 10.8% to its lowest since September 2023, the government said the full deficit including services also was its narrowest since then. Exports of goods and services totaled $277.3 billion, down from more than $278 billion in May, while total imports were $337.5 billion, down from $350.3 billion. Imports of consumer goods and industrial supplies and materials were both the lowest since the middle of the COVID-19 pandemic, while exports of capital goods hit a record high. The diminished trade deficit contributed heavily to the rebound in U.S. gross domestic product during the second quarter, reported last week, reversing a drag in the first quarter when imports had surged as consumers and businesses front-loaded purchases to beat the imposition of Trump's tariffs. The economy in the second quarter expanded at a 3.0% annualized rate after contracting at a 0.5% rate in the first three months of the year, but the headline figure masked underlying indications that activity was weakening. US trade advisor says Trump tariff rates unlikely to change Last week Trump, ahead of a self-imposed deadline of August 1, issued a barrage of notices informing scores of trading partners of higher import taxes set to be imposed on their goods exports to the U.S. With tariff rates ranging from 10% to 41% on imports to the U.S. set to kick in on August 7, the Budget Lab at Yale now estimates the average overall U.S. tariff rate has shot up to 18.3%, the highest since 1934, from between 2% and 3% before Trump returned to the White House in January. 'Last week's trade announcement reduced policy uncertainty, but businesses hoping tariffs were just threats must now adjust to the reality they are here to stay,' Nationwide Financial Markets Economist Oren Klachkin said in a note. 'We think the negative impact of high tariff rates will outweigh any positives from lower policy uncertainty.' China trade gap A centerpiece of Tuesday's report was the latest steep drop in the U.S. trade deficit with China, which tumbled by roughly a third to $9.5 billion in June to its narrowest since February 2004. Over five consecutive months of declines, it has narrowed by $22.2 billion - a 70% reduction. U.S. and China trade negotiators met last week in Sweden in the latest round of engagement over the trade war that has intensified since Trump's return. The U.S. currently imposes a 30% tariff on most Chinese imports, which have fueled a steep drop-off in inbound goods traffic from China. Imports from China dropped to $18.9 billion, the lowest since 2009. The trade negotiators have recommended that Trump extend an August 12 deadline for the current tariff rate to expire and snap back to more than 100%, where it had briefly been earlier this year after a round of tit-for-tat increases by both sides. 'We're getting very close to a deal,' Trump said Tuesday in an interview on CNBC. 'We're getting along with China very well.' Trump stakes reputation as dealmaker with tariff policy The deficit with China was not the only one to narrow. Amid a continuing impasse on trade talks with Canada and hefty tariffs imposed on autos, steel and aluminum, the trade gap with the United States' northern neighbor was the smallest in nearly five years at $1.3 billion. The trade deficit with Germany also slid, coming in at $3.8 billion and the lowest in five years. But a pair of key Asian trading partners - Taiwan and Vietnam - both posted record surpluses. Services sector softening The tariff effects showed signs last month of spilling over into the domestic services sector, which accounts for roughly two-thirds of total U.S. economic activity. Business activity unexpectedly flatlined in July with little change in orders and a further weakening in employment even as input costs climbed by the most in nearly three years, underscoring the ongoing drag on businesses from tariff policy uncertainty. The Institute for Supply Management's nonmanufacturing purchasing managers index slipped to 50.1 last month from 50.8 in June. Economists polled by Reuters had forecast the services PMI would rise to 51.5. A PMI reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of the economy. The survey's measure of services employment fell to 46.4, the lowest level since March, from 47.2 in June. It has indicated contraction in four of the last five months, and the reading followed the release last week of the Labor Department's surprisingly soft U.S. employment report. Price pressures, meanwhile, continue to mount. The survey's prices paid index rose to 69.9, the highest level since October 2022, from 67.5 in June. Inflation until now has largely remained moderate because businesses have been selling merchandise accumulated before import duties came into effect, but data last week showed prices in some categories of goods like home furnishings and recreational gear have begun rising briskly. More benign inflation from the services sector has helped keep overall inflation in check, but the ISM data brings into question whether that trend will continue or further fan concerns about the emergence of stagflation. Respondents to the ISM survey frequently mentioned tariffs as a drag. 'Trade uncertainty causing client reevaluation of feasibility for projects in certain sectors, resulting in some delays or cancellations,' a respondent from the construction sector said.
Business Recorder
6 hours ago
- Business Recorder
Wall Street pares gains after fresh economic data; earnings in spotlight
Wall Street's main indexes gave up opening gains on Tuesday after data showed U.S. services activity stalled, while investors continued to assess the latest batch of corporate earnings. At 10:07 a.m. ET, the Dow Jones Industrial Average fell 63.46 points, or 0.14%, to 44,110.18, and the S&P 500 lost 1.86 points, or 0.03%, to 6,328.08. The Nasdaq Composite gained 37.45 points, or 0.18%, to 21,091.04. U.S. services sector growth unexpectedly stalled in July, as new orders barely budged and hiring slipped further - even as input costs soared at their fastest pace in nearly three years - highlighting how uncertainty around the Trump administration's tariff policy continues to weigh on businesses. Wall Street had roared back to life on Monday by posting its best session since May 27 and recouping last week's losses when disappointing July jobs data and sharp downward revisions to prior months fueled expectations of a Fed rate cut in September. As per CME Group's FedWatch tool, odds of a September cut stands at 90%, up sharply from 63.3% just a week ago – and market watchers are eyeing at least two quarter-point cuts by year-end. Earnings from major names on Tuesday include Advanced Micro Devices, Snap and Rivian. Pfizer gained 3.6% in after raising its annual profit forecast, while Palantir Technologies rose 8.6% as it boosted itsannual revenue forecast. Meanwhile, President Donald Trump's decision to fire the head of the Bureau of Labor Statistics, responsible for past jobs data, stoked investors' fears about the integrity of economic data. Wall St rebounds as Fed rate cut bets intensify on weaker payrolls Trump on a CNBC interview said he would 'shortly' announce his pick for an open seat on the Federal Reserve's board of governors and possibly his nominee for Fed chair as well. 'You can announce who the next chair is, but I don't think that Chair Powell will be going anywhere until the end of his term. I also don't think that whoever is announced as the new Fed chair will really be impactful,' said Art Hogan, chief market strategist at B Riley Wealth. Investors also weighed the impact of U.S. tariffs on global economies and corporate earnings. Trump signaled that the U.S. could soon slap a 'small tariff' on pharmaceutical imports, with the potential for steeper rates down the line. He also hinted at progress toward a trade deal with China, suggesting a possible meeting with President Xi Jinping by this year's end if talks succeed. Beyond last week's jobs data jolt, Wall Street has stayed buoyant, fueled by blockbuster earnings from the 'Magnificent 7' tech giants, with Nvidia's results on deck in three weeks. Reflecting the market's upbeat mood, HSBC just boosted its S&P 500 year-end target by more than 800 points to 6,400, citing AI excitement and easing U.S. policy uncertainty. Caterpillar slipped 0.3% after reporting a lower second-quarter profit, hurt by sluggish demand for construction equipment and higher costs tied to U.S. tariffs. KFC parent Yum Brands fell 2.8% after missing estimates for second-quarter comparable sales and profit. Advancing issues outnumbered decliners by a 1.29-to-1 ratio on the NYSE and by a 1.07-to-1 ratio on the Nasdaq. The S&P 500 posted 31 new 52-week highs and four new lows, while the Nasdaq Composite recorded 54 new highs and 40 new lows.
Business Recorder
6 hours ago
- Business Recorder
TSX boosted by mining stocks, Fed rate cut optimism
Canada's main stock index rose on Tuesday, rebounding after Friday's selloff, with investors optimistic about the U.S. Federal Reserve cutting interest rates in September. The Toronto Stock Exchange's S&P/TSX composite index rose 1.8% by 10:05 ET (0205 GMT) to 27,495.10 points, after three straight sessions of declines. Global stocks were lifted after traders ramped up bets of a U.S. rate cut in September to almost 94%, according to CME Fedwatch, following last week's soft U.S. nonfarm payrolls data. 'People see (unemployment numbers) as being the rationale for a reduction in interest rates at the Fed, and that's essentially positive for stock markets,' said Thomas Caldwell, Chairman at Caldwell Securities. 'Earnings are coming across fairly well and so the world is moving on, but there's this undercurrent of what will be the longer term damage of tariffs and this upending of world trade.' On the day, material stocks were among top gainers, with gold mining stocks adding 6%. Kinross Gold Corp gained 9% to the top of the index while Novagold, IAMGOLD and Seabridge Gold were up more than 5% each. First Quantum Minerals' shares rose 4.4% after the miner signed a $1 billion deal with Royal Gold. Tech stocks rose 2.8%, boosted by e-commerce platform Shopify's 5.43% climb after brokerage Benchmark raised its target price ahead of earnings on Wednesday. Electronics firm Celestica rose 3% and cybersecurity firm Blackberry climbed 3.4%. All sectors were in the green after TSX posted its biggest decline since April in Friday's selloff. Data showed Canada's merchandise trade deficit widened in June to C$5.9 billion ($4.24 billion) with imports outpacing exports. Canadian ministers are set to start discussing trade with Mexican President Claudia Sheinbaum on Tuesday. U.S. President Donald Trump put a 35% tariff on goods imported from Canada last week.
