Before the Bell - The U.S. stock market moved higher yesterday, bringing the major averages to new high ground. Investors were likely focused on the corporate profit outlook and the start of the second-quarter earnings season. Overnight, the international markets put in a constructive session. In Asia, the Nikkei traded moderately higher. However, in Europe, the FTSE 100 delivered a more subdued performance. On our shores, equity futures have dipped into the red, indicating a sluggish opening to the trading day.

In economic news, there were no major items issued yesterday. However, a number of reports that measure inflation will be published this week. Specifically, this morning we get a look at the Consumer Price Index (CPI) for the month of June. Tomorrow, the Producer Price Index (PPI) will follow. In addition, the latest monthly export and import price information will be released on Thursday, and those numbers may get some attention on Wall Street. Although inflationary pressures have started to emerge, economists are not certain if this development will intensify and become a pronounced problem, or if it will ease over time. Although analysts are worried about corporate profit margins, they are probably more concerned that the Federal Reserve could choose to alter its dovish policies. For those watching the Fed, the Beige Book summation for the month of July is slated to be released tomorrow. 

In the corporate arena, second-quarter profits will likely be the major topic of conversation on Wall Street for the next few weeks. Typically, the large financial institutions are the first to weigh in with their results. In fact, this morning we heard from Goldman Sachs (GS) and JPMorgan Chase (JPM). Given that these companies are components of the Dow Jones Industrial Average, these reports could set the tone for the day. In general, analysts are expecting that the second-quarter earnings season will go well. Many companies should post strong quarterly results, compared to last year, aided by the vaccine rollout and the continued economic recovery. Analysts will also be looking closely at the guidance being provided. Of note, inflation has been an issue for Wall Street, and many investors will be looking for signs of rising prices and costs in the corporate arena.

Technically, the S&P 500 Index marched higher in June, and has extended these gains into the early part of July. However, equity valuations seem elevated, in our view. It will be critical that corporations do not put out disappointing reports.  – Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.