I'm Colette Auclair, and here is Schwab's early look at the markets for Monday, August 3.
Earnings remain front and center this week, with AI darling Palantir headlining today's calendar, while results from Space Exploration Technologies and Advanced Micro Devices will be in focus tomorrow. Investors will spend this morning parsing fresh manufacturing and construction spending data, although Friday's jobs report is likely to be the week's most closely watched economic release.
Markets are coming off a volatile week that featured mixed results from four of the Magnificent Seven, a Federal Reserve interest rate decision, and escalating U.S.-Iran tensions. After a divided Fed voted 9 to 3 to keep rates unchanged at its July meeting last Wednesday, Treasury yields rose sharply, while the yield curve steepened. The 30-year yield ended Friday at 5.25%—a 19-year high. That's a trend investors will be closely following this week and beyond, as it could weigh on markets.
Still, earnings season continues to take the spotlight for now. Palantir is expected to report a 116% surge in earnings per share, or EPS, and an 80% spike in revenues in its second quarter report after the bell. With AI-linked stocks wavering this summer, the bellwether's results will be closely watched. Expectations are high amid valuation concerns from some Wall Street analysts.
Investors will also be monitoring earnings from Marriott International and Mitsubishi UFJ Financial Group before markets open, while Vertex Pharmaceuticals and On Semiconductor will draw attention after the close.
However, some investors will be looking ahead to Space Exploration Technologies' first earnings report—due tomorrow post market close—after its June initial public offering, or IPO, raised a record $75 billion. SpaceX shares have struggled after a brief post-IPO surge, falling roughly 50% from their record high. Consensus expects the company to report revenues of $6.7 billion in the second quarter and a loss of $0.26 per share. With a market cap of over $1.4 trillion, some analysts have expressed valuation concerns, and short sellers have targeted the company since its debut.
Earnings from Advanced Micro Devices will also garner attention tomorrow, with investors looking for evidence that record hyperscaler AI spending can continue translating into strong revenue growth for the chipmaker. Results from Caterpillar, Merck, and Arista Networks are on deck as well.
In economic data today, the July ISM Manufacturing Purchasing Managers Index is expected to slip to 53, from 53.3 in June. That would extend a dip from May's bounce to 54, which was the highest level seen since May 2022. Any level above 50 indicates the sector is expanding.
June construction spending is also on the menu this morning. Consensus expects month-over-month growth of 0.2%, up slightly from May's 0.1% figure. Record data center constructing spending and rising input prices have helped mask weakness in this figure in recent months.
Looking ahead, Wednesday's ADP National Employment Report and Friday's nonfarm payrolls data will be meticulously reviewed as investors look for signs the labor market is beginning to soften, which could impact the path of interest rates this year. On Friday, futures trading priced in a 65% chance of September rate hike and a nearly 90% chance of at least one rate hike by year-end, according to the CME FedWatch Tool.
The Fed isn't the only central bank that may need to raise rates, however. Although the Bank of Japan maintained its policy rate at 1% on Friday, it warned that underlying inflation could exceed its 2% target in hawkish commentary. The decision came after Tokyo reportedly spent an estimated $59 billion on a massive currency intervention to defend the weakening yen last week.
Turning to Friday's key earnings results, oil majors Chevron and ExxonMobil reported surging profits amid rising oil prices in the second quarter. Chevron's net income spiked nearly 400% from a year ago to $12 billion, and its adjusted EPS came in at $6.06 versus the expected $5.56.
Exxon's net income hit $14.5 billion, more than double what it was a year ago. However, the company missed analysts' adjusted EPS estimates due to issues with the refining business.
In economic data Friday, the University of Michigan's final reading of July consumer sentiment came in ahead of expectations at 55.2. The figure marked a roughly 12% jump from June's level. Consumers seemed to brush off rising gas prices and tensions in the Middle East last month, although sentiment remained 11% below year-ago levels—and long-run inflation expectations held steady at 3.3%.
Meanwhile, the Employment Cost Index came in slightly ahead of expectations, rising 0.9% quarter-over-quarter and 3.4% from a year ago. The upside surprise suggests wage pressures may be easing more slowly than anticipated, which could complicate the Fed's fight to tame inflation.
Looking at Friday's market movers, Amazon surged 15.3% in its best day since 2012 after topping Wall Street's forecasts in its second quarter report after the bell on Thursday. A 37% jump in the company's cloud revenues, and a strong performance from its AI and custom chips business, helped lift shares. Amazon also raised its fiscal year 2026 capital expenditures guidance to $220 billion, even as its trailing twelve-month free cash flow slumped to negative $7.6 billion. However, investors seemed willing to overlook the aggressive spending and cash flow issues amid signs of a strong return on AI investments.
On the other hand, Apple sank 7.4% despite beating EPS and revenue forecasts after services revenue growth faltered. Soaring memory costs and shortages of advanced chipmaking capacity also led the company to issue weaker margin and revenue guidance for its upcoming quarter.
The industrial gases giant Linde dropped 6% despite topping Wall Street's EPS and revenue estimates as weak guidance and margin pressure in the company's healthcare segment appeared to spook investors.
Stryker experienced a similar beat then drop dynamic. Its shares fell 6.5% even after the medical technology company posted strong second quarter results amid a recovery from a March cyberattack.
Coinbase plummeted 10.6% after a weak crypto market led the company to post a net loss of $359 million, or $1.36 per share, in the second quarter. In the same quarter a year ago, it reported a profit of $1.43 billion, or $5.14 per share.
Bitcoin also continued its slide on Friday, dropping 3% to roughly $62,900. The digital currency is now down roughly 28% year-to-date.
"The broader crypto market is down today, potentially due to a security flaw in some crypto wallets resulting in approximately $40 million of bitcoin being stolen," said Jim Ferraioli,
director of crypto research and strategy at the Schwab Center for Financial Research. "The random number generator used in the wallets to generate private keys was not a true random number generator and ended up being predictable, so hackers, presumably using AI, were able to figure out private keys."
Overall, four out of 11 S&P 500 sectors ended Friday in the green. The consumer discretionary sector surged more than 6% amid Amazon's strong performance, while materials and information technology lagged.
Despite the market's strong performance, breadth continued to weaken. Roughly 62% of S&P 500 stocks traded above their 50-day moving average, while around 66% traded above their 200-day moving average.
The Dow Jones Industrial Average® ($DJI) rose 276.97 points (+0.53%) Friday to 52,485.03; the S&P 500 Index ($SPX) jumped 52.09 points (+0.70%) to 7,489.72, and the Nasdaq Composite® ($COMP) spiked 251.68 points (+1.00%) to 25,373.85.
For the week, the Dow Jones rose 1.04%, the S&P 500 popped 1.05%, and the Nasdaq Composite climbed 1.59%.