The U.S. stock market has entered a three-day pause ahead of key variables, including the Federal Open Market Committee (FOMC) meeting, the release of second-quarter Gross Domestic Product (GDP) data, employment figures, results from big tech companies, and President Trump's tariff deadline. Wall Street analysts note that "this week is one of the most important periods to determine the market direction for this year."
On the 30th (local time), the preliminary GDP for the second quarter in the U.S. was released. The Atlanta Federal Reserve Bank estimated that GDP grew at an annual rate of 2.9%. In the first quarter, GDP recorded a contraction of 1.4% due to a sharp increase in imports, making this figure a barometer for economic recovery.
The FOMC meeting taking place on the same day is expected to keep the key interest rate unchanged at the current 4.25% to 4.50%. The market is focused on the remarks of Chair Powell during the press conference. With recently released Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) figures showing signs of slowing, expectations for an interest rate cut have revived, while a temperature difference between "doves" and "hawks" within the Federal Reserve is being sensed.
On the 1st of next month, the Labor Department is set to release the July employment report. According to aggregated data from financial information provider FactSet, non-farm payroll employment is estimated to have increased by 115,000 in July, a slowdown from 147,000 in the previous month. If the employment growth significantly deviates from expectations, it could impact the Federal Reserve's outlook on interest rate policy.
The performance reports of big tech corporations will also follow. This week, major tech stocks with a combined market capitalization of $11 trillion, including Apple, Microsoft, Meta, and Amazon, will release their results. These corporations have led market gains due to the growing demand for artificial intelligence (AI). However, if their results fall short of expectations amidst high valuation burdens, it could exert downward pressure on the overall market.
The Standard & Poor's (S&P) 500 index has risen 8.3% year-to-date, and the forward 12-month price-to-earnings ratio (PER) stands at 22 times, significantly exceeding the 10-year average of 17 to 18 times. Experts warn that "it will be difficult for such valuations to persist in a high-interest environment."
Tensions are rising as the "Liberation Day" deadline announced by President Donald Trump approaches at 12:01 a.m. on August 1 (Eastern Time). President Trump stated that he will impose tariffs on countries that fail to conclude trade agreements with the U.S. by that deadline. This could not only pressure China but also impact the global supply chain, drawing attention.
The U.S. has already concluded trade agreements with Japan, the EU, and the UK, and is currently in a temporary tariff truce with China. However, there are concerns that if President Trump intensifies his protectionist stance, market uncertainty may increase.
Charlie McElligott, a strategist at Nomura Holdings, noted that "if President Trump's tariff measures materialize, they could shock the supply chain again and stimulate inflationary expectations," adding that "this could be a significant variable in FOMC discussions."
The Financial Times (FT) evaluated this week, stating that "this is not just a simple earnings season but a turning point where core issues of the U.S. economy, including signals of an economic rebound, monetary policy trends, and the extent of protectionism, are all tested simultaneously."