Pulse of the Markets Report 7/14/23

The stock markets are showing relatively flat movement as investors prepare for a significant round of earnings reports. Key companies such as United Health (UNH), J.P. Morgan (JPM), Blackrock (BLK), Citigroup (C), Ericsson (ERIC), and Wells Fargo (WFC) are set to release their Q2 financial results, providing crucial insights into corporate performance.

Among these companies, UNH, BLK, ERIC, and JPM have already released their earnings reports. Early indications suggest positive outcomes, with all four surpassing bottom-line expectations. However, ERIC experienced some weakness in its North American operations due to reduced capital expenditure and inventory following busy investment years in 2021 and 2022. Additionally, ERIC's underwhelming guidance has put downward pressure on Nokia (NOK) stock.

Overall, the news has been positive, contributing to the prevailing market momentum. This week's updates on inflation have boosted market confidence, signaling that the rate hike cycle may be nearing its end. Chinese officials even mentioned the possibility of CPI entering deflationary territory, leading to speculation about potential stimulus measures. In terms of economic data, the market will receive two more inflation-related data points: Import/Export Prices at 8:30 am ET and the University of Michigan Consumer Sentiment at 10 am.

While earnings reports could potentially pose challenges, only 4% of S&P stocks are reporting this week, indicating a lot of information is yet to be digested. Nonetheless, early indications suggest that the earnings news will not disrupt the current market trends.

Investors should keep an eye on the SPDR Dow Jones Industrial ETF (DIA), which was included in the "Doji Day" list. UNH, as the top-weighted component of the ETF, had reached oversold territory with its Relative Strength Index (RSI) at 31. The positive earnings news is expected to bring relief to investors, especially considering that the stock trades at 16 times its earnings, making it an attractive option for under-invested portfolio managers. JPM, as the 19th weighted component, will also contribute to boosting the index.

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