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US Markets Bounce Back at Week's End


John McNierney, right, trading GE stock for Citadel Securities, updates John Panin, left, and Greg Rowe, center, with the stock's price at the New York Stock Exchange, July 22, 2016.

John McNierney, right, trading GE stock for Citadel Securities, updates John Panin, left, and Greg Rowe, center, with the stock's price at the New York Stock Exchange, July 22, 2016.

U.S. markets edged higher Friday, bouncing back after small pullbacks on Thursday, to end the week on a positive note. Technology and telecom stocks led the way higher, pushing the S&P to an all-time high in intraday trading.

The Dow Jones industrial average is now up 8 percent from its post-Brexit lows in late June, as economic news in the U.S. continues to improve. Quarterly earnings results have also exceeded expectations.

Analysts at RBC Capital Markets see continued strength in the market:

“Beyond short-term noise, we remain optimistic and do not see any meaningful technical evidence that suggests the bull market is at risk. As a result, we continue to view third-quarter pullbacks as opportunities to increase equity exposure.”

Crude was down another 2 percent after the U.S. oil rig count rose for a fourth week in a row, plunging oil to a two-month low. The U.S. dollar’s rally to a four-month high in addition to oversupply issues put pressure on the commodity.

Week ahead

On Monday, the Democratic National Convention opens in Philadelphia. Hillary Clinton will accept her party's nomination for president on the final day, July 28. President Barack Obama will speak at the convention on July 27.

The Federal Open Market Committee is expected to keep interest rates unchanged at the conclusion of a two-day meeting on Wednesday as Chair Janet Yellen and the voting members of the Federal Reserve assess the current state of the global economy following the United Kingdom’s decision to leave the European Union.

Several key pieces of economic data are on tap, including S&P Case-Shiller HPI, Consumer Confidence, Pending Home Sales, Employment Cost Index, Chicago PMI and Consumer Sentiment.

Earnings

The earnings calendar will see one of its busiest weeks of the quarter as 39 percent of the S&P 500 will report results. On Monday alone, nine companies are scheduled, including Express Scripts, Gilead and Kimberly-Clark.

According to S&P Global Market Intelligence, the earnings beat rate in the second quarter is currently 64 percent, just below the historic average of 66 percent, as 25 percent of the index has reported thus far.

Apple reports

Perhaps the most widely followed stock by traders and the media is Apple, which delivers results after the market closes on Tuesday.

In April, Apple reported its first revenue drop in 13 years, sending the stock price lower by 14 percent. This quarter, analysts expect Tim Cook to focus on the iPhone 7 and any other new hardware, software services growth, premium smartphone market share and Samsung competition, retail access in India and potential expansion into other emerging markets.

Deutsche Bank told investors in a research note that it expects margin pressure as iPhone sales decline.

“We expect iPhone units to decline by 14 percent year-over-year in the quarter to 41 million units, the low end of investor expectations, which we believe are in the 41-43 million range. Our checks suggest iPhone SE sales were stronger than expected, which will likely pressure iPhone sales and profitability.”

Software sales may be a bright spot.

“We see some potential that services sales growth offsets some of this pressure, due to strong App Store sales, but generally we anticipate results that are in line with the company's guidance for F3Q-16 sales of $41-$43 billion,” Deutsche Bank said.

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