Stepped back from the highs

Last week, major US indices lost about 1%. Investors were evaluating the new portion of the quarterly reports of companies, statistics and the speech of the US Federal Reserve Chairman Jerome Powell. The first half of the week was successful. The Nasdaq 100 managed to test a new all-time high at 15,000 points. The S&P 500 came close to the level of 4,400 points. However, on Thursday and Friday, the indicators lost all growth and corrected. June inflation data and the spread of a new strain of coronavirus have put pressure on asset values ​​around the world. In our opinion, it is too early to talk about a global correction. From a technical point of view, American indicators look pretty confident. In addition, a successful 2Q corporate reporting season can bring many surprises to investor sentiment.

In June, the pace of US consumer price increases peaked in nearly 13 years as the economic recovery picks up steam. The CPI jumped 5.4% compared to June last year. Prices excluding food and energy (Core CPI) in June increased 4.5% year-on-year, a record rise since November 1991. Statistics released Thursday showed that US jobless claims fell last week in line with forecast. The volume of industrial production in the United States in June increased by 0.4% from the previous month, according to data from the Federal Reserve System. Analysts polled by Trading Economics predicted an average growth of 0.6%.

The Fed chief, who presented a semi-annual report on the state of the US economy to the Senate Banking Committee on Thursday, said changing trends in labor force participation could complicate the Fed's task of assessing how close the US economy is to "full employment." This, however, will not stop the central bank from starting to cut back on asset purchases, Powell said. Understanding new trends in the labor market may be more important later, when the Fed begins to think about raising the base interest rate. It will take the Fed years to understand the new trends in the US labor market that have emerged from the COVID-19 pandemic, Powell said. The head of the Fed said that the US Central Bank is not close to making changes in monetary policy.

Profits of US companies, whose shares are included in the Standard & Poor's 500 stock index, increased by almost 63% in the second quarter after rising 52.5% in January-March, according to FactSet forecasts. If expectations are met, the jump in the indicator in the past quarter will be the most significant in more than a decade - since the financial crisis of 2008-2009. With stock prices soaring now, CEOs' forward-looking statements will also attract investor attention in the upcoming corporate reporting season.

On Monday, Prime Minister Boris Johnson is due to speak out in favor of lifting most of the coronavirus restrictions in England. On Tuesday, the US will publish statistics on the number of new buildings in June. On Thursday, the ECB is to publish its key rate decision. The market does not expect surprises, predicting that the rate will remain at the same level. President Christine Lagarde's Press Conference will also take place on Thursday, and US statistics (Leading Economic Indicators and Existing Home Sales) will also be released. The Summer Olympic Games in Tokyo kick off on Friday, and the ECB will discuss the possibility of lifting restrictions on dividends and buybacks from banks. In the US, PMIs will be published.