US stock futures, including the Dow Jones, S&P 500, and Nasdaq 100, climbed on Monday as hopes for a US-Iran deal led to a significant drop in oil prices. WTI crude fell over 6%, and Brent crude slid 5%, easing inflation concerns and causing Treasury yields to drop, with the 10-year T-note yield falling five basis points to 4.69%. This positive sentiment was driven by reports that President Trump called off a strike on Iran and that talks with Iran were expected to begin, potentially including the reopening of the Strait of Hormuz.
The market's attention is now firmly on the ongoing second-quarter corporate earnings season, with over a quarter of S&P 500 companies scheduled to report. Investors are anticipating reports from major companies such as Advanced Micro Devices (AMD), Sandisk (SNDK), SpaceX (SPCX), Western Digital (WDC), ON Semiconductor (ON), Palantir Technologies (PLTR), Walt Disney (DIS), McDonald’s (MCD), Caterpillar (CAT), Eli Lilly and Company (LLY), Gilead Sciences (GILD), Pfizer (PFE), Shopify (SHOP), Uber Technologies (UBER), and Cloudflare (NET). Bloomberg Intelligence projects an average 26% jump in quarterly earnings for S&P 500 companies compared to the previous year.
Despite the overall market gains, chip and AI infrastructure stocks experienced pre-market declines, with Sandisk (SNDK) and Arm Holdings (ARM) falling over 2%. Apple (AAPL) also slumped over 7% in Friday's trading after providing lower-than-expected FQ4 revenue growth guidance. Conversely, Amazon.com (AMZN) jumped over 15% after its cloud-computing unit, Amazon Web Services, recorded its fastest quarterly revenue growth since 2021 in Q2. DexCom (DXCM) surged nearly 12% after strong Q2 results and increased full-year revenue guidance, while Monolithic Power Systems (MPWR) climbed over 8% after better-than-expected Q2 results and optimistic Q3 revenue guidance.
Beyond earnings, investors are closely watching a slew of US labor market data this week, culminating in Friday’s July Nonfarm Payrolls report. Economists expect the unemployment rate to hold steady at 4.2% and payrolls to increase by 88K, which would be a "Goldilocks-type" outcome supporting the Federal Reserve's decision to potentially remain on hold in September. Other key data points include Initial Jobless Claims, JOLTS Job Openings, ADP Nonfarm Employment Change, US Trade Balance, Factory Orders, S&P Global Services PMI, ISM Non-Manufacturing PMI, Nonfarm Productivity, Unit Labor Costs, and Consumer Credit data. The ISM Manufacturing PMI, expected at 54.0 for July, will also be scrutinized for signs of inflationary pressures and future demand.
Traders are currently pricing in a 64% chance of a Federal Reserve interest rate hike in September, according to the CME Group’s FedWatch Tool. Goldman Sachs analysts noted that "More government debt, increased issuance and persistent inflation have all contributed to a higher cost of capital, leaving earnings as the key driver of returns. We think this trend will continue." The market is also weighing potential consolidation in the healthcare sector, following reports of preliminary merger talks between Bristol Myers Squibb and AstraZeneca.
