The S&P 500 Expected to Remain Under Pressure This Week

Equity markets in the United States declined for the third consecutive week as a stronger-than-expected job gains report could result in aggressive interest rate hikes by the Federal Reserve, which is looking to bring inflation under check.

The S&P 500 and the Dow Jones index were down 3%, while the Nasdaq Composite index moved lower by 4% in the week ended on September 2. The 10-year U.S. Treasury note stood at 3.19%, while crude oil prices experienced an uptick on Friday after G7 leaders agreed to limit Russia's oil prices. 

But Russia also announced it would ban exports to any countries that agree to cap oil prices. However, West Texas Intermediate (WTI) crude fell 6% last week to trade at $87 per barrel.

Which companies will report earnings next week?

The U.S. markets will be shut on Monday due to the Labor Day holiday. Despite a shorter week, several companies will be reporting quarterly earnings that include:

Asana: Analysts expect the company to report revenues of $127.24 million and an adjusted loss of $0.39 per share in the quarter that ended in July. Asana (NYSE: ASAN) shares are down 76% in 2022.

DocuSign: Wall Street forecasts DocuSign (NASDAQ: DOCU) to report revenue of $602.24 million and adjusted earnings of $0.42 per share. DOCU stock has declined 64% in 2022.

Kroger: The big box retailer will provide a good indicator to gauge consumer spending that is under pressure due to rising prices and higher interest rates. The company is expected to report revenue of $34.35 billion and adjusted earnings of $0.77 per share. Kroger (NYSE: KR) shares have outpaced the broader markets this year and have gained 7% in 2022.

Further, Apple will host its annual event on Wednesday and is expected to launch the iPhone 14, the next Apple Watch, and an update to the AirPods Pro.

Additionally, the markets will also be impacted by the Purchasing Managers Index data, and the monetary policy meeting of the European Central Bank held this week. Let’s look at both of them in detail.

PMI data might be tepid

The purchasing managers index (PMI) survey reading will be released by the S&P Global and the Institute for Supply Management on Tuesday for the month of August. The PMI is estimated to fall to 45 from 47.7 in July. A PMI reading of below 50 indicated economic contraction.

The PMI data has declined for six consecutive months as business activity has reduced across the manufacturing and services sectors.

Further, ISM data for non-manufacturing PMI will provide a glimpse into the strength of the U.S. services sector. The non-manufacturing PMI data is expected at 55.5 in August, much below a multi-year high of 69 recorded last November.

Europe wrestling with massive gas bills

There is a good chance for the European Central Bank to raise interest rates again during their policy meeting on Wednesday. Market participants are projecting a hike of at least 50 basis points, while some are calling for a hike of 75 basis points as well.

The Deposit Facility Rate increased by 50 basis points in July as the region continues to fight inflation which touched an all-time high of 9.1% in August. Further, a depreciating euro may also prompt the ECB to consider increasing interest rates at a faster pace.

Related: September Is Usually Grim for Stocks, This Year Could Be Different – Here’s Why