This Week

Last week technically ended in the red for the SPX, but just barely—as stocks mostly hovered around their all-time closing highs from the week before. That tight, low-vol action came despite what was supposed to be a major week for trade headlines around the prior deadline. We did news popping up throughout and initial reactions tended to be gaps lower, but investors have mostly used that for a buy the dip opportunity, helping fuel a grind higher in recent weeks.. We’re in for more of the same this week on trade headlines, and in fact, the weekend already brought a fresh round of threats, but following an earnings and economic data vacuum over the past two week, the focus begins to shift to other matters.

This week brings a loaded economic calendar and the first big week of earnings season. We’ll get into what to watch shortly, but first, here are some of the weekend’s key headlines:

• Trump announces 30% tariffs on EU and Mexico, starting Aug. 1 (CNBC)

  • President Donald Trump said Saturday the U.S. will impose a 30% tariff on goods from the European Union and Mexico that will take effect on Aug. 1. The EU was seeking at least a preliminary agreement that would spare it from becoming the latest recipient of a letter from Trump dictating a new, across-the-board tariff on its exports to the U.S. The EU collectively sells more to the U.S. than any single country: Total U.S. goods imports from the EU topped $553 billion in 2022, according to the Office of the U.S. Trade Representative. Total U.S. imports from Mexico were approximately $454.8 billion in 2022, according to the U.S. Trade Representative. The two trading partners combined make up roughly one-third of U.S. imports.

• EU to Extend Suspension of Countermeasures to Allow US Talks (Bloomberg)

  • European Commission chief Ursula von der Leyen said the European Union will extend the suspension of trade countermeasures against the US until Aug. 1 to allow for further talks after Donald Trump threatened a new 30% tariff rate against the bloc. The countermeasures, which the bloc had adopted in response to tariffs imposed by Trump on steel and aluminum, had been paused to allow for negotiations and were due to snap back into place at midnight on Tuesday.

    “At the same time, we will continue to prepare further countermeasures so we are fully prepared,” von der Leyen told reporters in Brussels on Sunday, while reiterating the EU’s preference for a “negotiated solution.”

• Trump ‘certainly’ can fire Fed chair Powell ‘if there’s cause’: Hassett (CNBC)

  • National Economic Council Director Kevin Hassett said Sunday that whether the Trump administration has the authority to fire Federal Reserve Chair Jerome Powell is “being looked into.”

    “But certainly, if there’s cause, he does,” Hassett said on ABC News’ “This Week” of Trump’s authority to remove Powell before his term is up next spring. President Donald Trump has said that he does not want to fire Powell, but Hassett’s comments suggest the White House is still considering — and potentially moving towards — the possibility. Top Trump administration officials have escalated their criticisms of Powell in recent days, in particular by targeting the Federal Reserve’s $2.5 billion renovation project, which Hassett said has gone over budget by $700 million. Taxpayers are not paying for the renovations. The Fed is self-funded through interest it makes on securities held by the institution and through fees charged banks.

• Earnings Season Poses New Test for Stock-Market Records (WSJ)

  • A barrage of tariff threats from President Trump didn’t keep investors from driving stocks to fresh records this past week. The coming earnings season could make the trade war harder to ignore. Strong corporate profits have helped the S&P 500 rebound from the depths of April’s turmoil to a gain of 6.4% this year. The broad index notched fresh records in recent days even as the White House threatened tariffs on goods from a host of trade partners, including Brazil and Canada. Investors are seeking details on how companies are coping with trade turmoil

• Economists See Lower Recession Risk and Stronger Job Growth: WSJ Survey (WSJ)

  • Forecasters nudge up growth, trim inflation estimates as tariffs prove lower, less costly than expected in April. The economic fallout from President Trump’s policies may prove less dire than feared. Economists expect stronger growth and job creation, lower risk of recession and cooler inflation than they did three months ago, according to The Wall Street Journal’s quarterly survey of professional forecasters.

• SpaceX to Invest $2 Billion Into Elon Musk’s xAI (WSJ)

  • Elon Musk’s SpaceX has agreed to invest $2 billion in his artificial-intelligence company xAI, investors close to the companies said, nearly half of the Grok chatbot maker’s recent equity raise. Musk has repeatedly mobilized his business empire to boost the AI startup, which is racing to catch up with OpenAI. Earlier this year, he merged xAI with X, combining what was a small research lab with a social-media platform that helps amplify the reach of its Grok chatbot. The merger valued the new company at $113 billion.

• A $100 billion mystery is unfolding on tariffs and inflation and economists are cracking the case (Fortune)

  • The tariffs are certainly in place: The Treasury so far has collected a record-setting $100 billion in customs duties, and is on track to pull in $300 billion this year. The tariffs are paid by U.S. importers—think Walmart and other retailers—when goods cross the border into the U.S. It takes some time to work their way into the system, but eventually higher prices get passed onto consumers. Those higher prices directly influence the overall price levels in inflation measures. Except there’s a mystery, wrapped in an enigma, and coated in a puzzle. One place tariffs aren’t showing up? In the inflation numbers.

    For four months, official inflation readings from the Bureau of Labor Statistics have come in under expectations, with the latest inflation reading a relatively modest 2.4%. The president’s Council of Economic Advisers (CEA) this week released a brief arguing that import prices have actually been falling.

    Why doesn’t the data show a tariff hit? Here’s what leading economists told Fortune.

Index implied got crushed last week following the extension of the tariff implementations but as noted in this space there were some signs of an uptick in single stock vols. That of course will pick up further as we enter the heart of earnings season. For this week on the indices:

This Week’s Expected Moves:

• SPX/SPY: 1.4% (6150-6350)

  • QQQ: 1.6%

  • IWM: 2.2%

  • TLT: 1.5%

  • USO: 4%

A couple quick notes on the above: TLT’s 1.5% expected move isn’t far off from what we’ve been seeing on a normal week lately. Yields have been bouncing around day to day, but overall, they've stayed within a range for the past month. Traders aren’t really pricing in any big fireworks from CPI or PPI, so a big surprise either way could definitely catch traders off guard. Also worth flagging—USO is starting to show a little fear again on the implied volatility side as oil prices crept back toward the $70 mark last week.

As for this week, the spotlight’s mostly on the inflation data Tuesday and Wednesday, but we’ll also get key reads on retail sales and consumer sentiment towards the end of the week.

Economic Calendar: 

• Tuesday

  • 8:30am - CPI

  • 8:30am - NY Empire Manufacturing

  • 9:15am - Fed Bowman Speech

  • 12:15 - Fed Barr Speech

• Wednesday

  • 8:30am - PPI

  • 9:15pm - Fed Hammack Speech

  • 2pm - Beige Book

• Thursday

  • 8:30am - Retails Sales

  • 10am - Fed Kugler Speech

  • 1:30am - Fed Cook Speech

• Friday

  • 10am - UoM Consumer Sentiment

It’s a packed week for earnings—not just with all the big banks reporting, but also the start of tech season, with Netflix, ASML, and Taiwan Semi on deck. United Airlines goes into its report following a big move Friday on Delta’s report. Overall, according to FactSet, analysts expect 5% earnings growth for the S&P 500. That’s as stocks head into earnings at all time highs. Traders will be watching closely to see if companies can clear these lowered expectations enough to justify many of their recent runs.

Earnings (with expected moves):

• Monday

  • Pre-market: FAST 5.4%

• Tuesday

  • Pre-market: JPM 3.5%, C 4%, WFC 4.2%

• Wednesday

  • Pre-market: ASML 5.8%, BAC 3.9%, GS 3.8%, MS 3.9%, JNJ 2.5%

  • After-hours: UAL 7.9%

• Thursday

  • Pre-market: TSM 4.9%, PEP 3.8%, ABT 3.3%

  • After-hours: NFLX 7%, IBKR 5.1%

• Friday

  • Pre-market: MMM 5.3%

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