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4 Key Factors to Monitor in the Stock Market This Week

Stocks had a rough week, with a pummeling Friday after the July jobs data came in weaker than expected. The Nasdaq led the way down, losing 3.35% on the week, followed by the Dow Jones Industrial’s decline of 2.1%, and the S & P 500’s 2.06% drop. This dramatic shift in sentiment began on Thursday when bad economic news started to impact the stock market negatively.

Previously, bad economic news was seen as good news for the stock market because it meant the Federal Reserve would start cutting interest rates sooner. However, the recent data has shown that bad economic news is now bad news for stocks. Thursday saw a drop in U.S. manufacturing activity for July and a jump in initial jobless claims, which dragged down the market. Friday’s payroll report also showed an uptick in unemployment and lower-than-expected wage inflation, further fueling concerns.

The fear now is that the Federal Reserve, which has been criticized for waiting too long to raise rates, is moving too slow to lower them. Before Friday’s employment data, three quarter-percentage point cuts were expected this year, starting in September. Now, there is speculation that September might see a half-percentage point rate cut.

Jim Cramer expressed his belief that the Fed should have cut at this week’s meeting. Despite the market turmoil, he advised calm and suggested that the flight from stocks, especially mega-cap tech companies, was overdone. In fact, he used the market drop as an opportunity to pick up shares of high-quality companies. On Friday morning, he purchased more Broadcom and revealed six stocks he’s eyeing in the coming week.

Looking at the S & P 500, utilities led to the upside, followed by real estate and communication services sectors. On the downside, consumer discretionary, technology, and energy sectors were hit the hardest.

Next week is expected to be light on economic data, so earnings reports and CEO commentaries will likely be the driving force behind market action. The release of the July ISM Services PMI will kick off the trading week, with economists looking for a reading of 51.5, indicating a slight expansion after contracting in June.

In terms of earnings, about 75% of the S & P 500 has reported earnings, with 78% exceeding earnings expectations and 59% reporting better-than-expected revenue results. Investors will be closely watching companies like Wynn Resorts, Disney, and Eli Lilly for insights into their performance and future outlook.

Overall, the stock market’s recent volatility underscores the importance of staying informed and being prepared for market fluctuations. As investors navigate through uncertain times, it’s crucial to analyze data, monitor trends, and make informed decisions based on sound research and analysis.

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