The US stock market saw a simultaneous increase this week, driven by better-than-expected corporate earnings reports and progress in tariff trade negotiations. The S&P 500 index set a new closing record high for five consecutive trading days, maintaining a bullish sentiment in the market as investors closely monitor the upcoming peak earnings week, progress in tariff negotiations, and next week’s Federal Reserve interest rate decision.
On Friday, July 25th, the S&P 500 index rose by 0.40% to close at 6,388.64 points; the Nasdaq index increased by 0.24% to close at 21,108.32 points, and the Dow Jones Industrial Average rose by 0.47% to close at 44,901.92 points.
Throughout the week, the S&P 500 set new closing highs for five consecutive trading days, showing strength after breaking through the 6,300-point mark on Monday. The last time such a “perfect week” occurred was back in November 2021. The Nasdaq index also set new closing highs four times this week, surpassing the 21,000-point mark on Wednesday.
All three major indices closed higher for the week, with the Dow Jones Industrial Average rising by approximately 1.3%, the Nasdaq by 1%, and the S&P 500 accumulating a gain of about 1.5%.
The key driving force behind the stock market’s strength this week was the widespread outperformance of corporate earnings. According to FactSet data, out of the S&P 500 component companies that have reported earnings, over 82% have exceeded Wall Street’s expectations.
Google’s parent company Alphabet saw a 4% increase in its stock price this week, while Verizon rose by 5%, both surpassing market expectations in performance.
Deckers Outdoor Corporation, the maker of UGG and Hoka shoes, benefited from strong overseas market demand, with its stock price soaring by 11% in a single day. Conversely, chip manufacturer Intel’s stock plummeted by 8.5% due to expectations of increased future losses and announced layoffs. After the $8.4 billion merger approval between Paramount Global and Skydance Media by US regulatory authorities, Paramount Global saw a 1.6% decrease in its stock price.
In general, market sentiment remains optimistic towards this earnings season, with analysts believing it will help sustain the bullish trend in the stock market.
Terry Sandven, Chief Equity Strategist at US Bank Wealth Management, stated, “This bullish trend continues, primarily supported by solid fundamentals. Stable inflation, fluctuating interest rates, and ongoing corporate profit growth provide a solid backdrop for the market’s rise. We anticipate a continued bullish trend during this earnings season.”
Recent progress in trade negotiations between the United States and multiple countries has further boosted market confidence. President Trump announced a “huge” trade agreement with Japan this week, including a 15% “reciprocal tariff,” and also reached a consensus on a framework agreement with Indonesia.
Trump mentioned on Friday that more agreements are expected to be announced before the August 1 tariff deadline, with the European Union potentially being the next target. Ursula von der Leyen, President of the European Commission, also announced plans to meet with Trump in Scotland on Sunday.
Paul Christopher from the investment institute at Wells Fargo Bank said, “If an agreement is reached with the European Union following those with Japan, it will be crucial for further market growth. However, failure to sign an agreement before August 1 would be a real shock.”
Despite continued market highs, some institutions warn investors to be cautious of potential volatility risks. The S&P 500 had a stable performance this week, with the VIX volatility index, a measure of market fear, dropping below 15, the lowest level since February. Morgan Stanley pointed out that in a low-volatility and high uptrend environment, investors may face the “temptation of chasing prices and complacency.”
UBS believes that although market fluctuations may occur in the short term, the volatility should be considered a “temporary” phenomenon.
Next week, over 150 S&P 500 component companies will report earnings, including tech giants such as Apple, Amazon, Meta, Microsoft, and others.
Additionally, the Federal Reserve will hold a policy meeting, with markets generally expecting interest rates to remain in the range of 4.25% to 4.5%.
According to CME’s FedWatch tool, traders estimate a 60% probability of a rate cut in September. Trump mentioned on Friday that he believes Federal Reserve Chairman Jerome Powell may be preparing for a rate cut.
The employment report will also be released next week, serving as another key indicator to observe the economic fundamentals.
(This article referenced reports from Reuters, Bloomberg, and CNBC)