Market Insights

Growth stocks and the Nasdaq-100 could be attempting a turn after six months of steady declines.

The technology-heavy index rose 4.7 percent in the holiday-shortened week between Friday, July 1, and Friday, July 8. In absolute terms, the gain was smaller than two weeks prior. But compared with the broader S&P 500 (up 1.9 percent), it was the best performance since June 2021.

That kind of relative strength has been missing this year because of inflation and the Federal Reserve’s tighter monetary policy. Investors could now be asking whether enough bad news has been priced in — especially after the recent drop in commodity prices. The question could have traders holding their breaths for key inflation reports on Wednesday and Thursday. After those, attention will likely shift to corporate earnings.

Last week didn’t bring many quarterly results. Economic news showed job growth and service industries remaining strong. Jobless claims missed estimates and minutes from the last Fed meeting reiterated the central bank’s commitment to lower inflation.

Growth Stocks Jump

Consumer discretionaries, technology and communication stocks were the top-performing sectors last week. Together, they account for over three-quarters of the Nasdaq-100’s holdings.

Smaller growth buckets, like biotechnology, solar energy and semiconductors gained even more. Recent IPOs also jumped following months of downside.

Investors also dumped inflation plays and safe havens like gold miners, utilities, energy stocks and materials.

Charting the Market

Last week’s bounce kept the S&P 500 above 3730. That could be important because it represents the first higher low since the market began its correction in January.

The index also formed a bullish inside week, a potential sign of direction changing.

Another pattern is the falling trendline along the highs of April and June. Will a break of that resistance bring more buyers to the market?

Aside from the charts, earnings season could have an impact on stocks. Wall Street analysts expect profit growth of just 4.3 percent, according to FactSet. But what if numbers are better than feared? Surveys from the American Association of Individual Investors and the National Association of Active Investment Managers show sentiment near the most pessimistic levels in years. Could there be a relief rally?

The Week Ahead

Markets get back into the swing of things this week following the Independence Day holiday.

The first big item could be reaction to Elon Musk’s decision not to acquire Twitter (TWTR). The initial reaction could be selling in TWTR and relief for Tesla (TSLA), where Musk is CEO.

Another potential catalyst is Amazon.com’s (AMZN) Prime Day on tomorrow and the next day. PepsiCo (PEP) announces results Tuesday morning.

The first big inflation report is the consumer price index on Wednesday morning. Crude oil inventories and Delta Airlines (DAL) earnings are also due.

Thursday features results from JPMorgan Chase (JPM), Morgan Stanley (MS) ad Taiwan Semiconductor (TSM). Producer price inflation (PPI) and initial jobless claims are also on the agenda.

Friday is busy. Major companies like Citi (C), United Health (UNH) and Wells Fargo (WFC) report earnings. Retail sales and consumer sentiment are due as well.