Five things to watch in markets in the week ahead

Investing.com - Corporate earnings will likely be at the forefront of investors’ minds at the start of the new trading week. Results from some America’s largest companies have so far been widely robust, helping to assuage some emerging fears over the state of the U.S. economy. A host of countries face an August 7 deadline for elevated U.S. tariffs to come into effect. Elsewhere, thousands of Boeing workers are set to go on strike from Monday.

1. Earnings ahead

A broadly solid corporate earnings season, which has helped to underline the staying power of a multi-year boom in enthusiasm around the applications of artificial intelligence, is set to march on this week.

Big-name tech companies like Facebook-owner Meta Platforms (NASDAQ:META) and software group Microsoft (NASDAQ:MSFT) have delivered blowout results in recent days and, perhaps more notably, backed their plans for massive capital expenditures on AI.

These statements have tamped down some lingering fears over the impact of President Donald Trump’s sweeping tariff agenda, although a selection of firms have begun to hint that price hikes could be coming in the months ahead.

Still, with more than half of the businesses in the S&P 500 having reported, year-on-year earnings growth for the second quarter is seen at 9.8%, compared with an estimated uptick of 5.8% on July 1, according to LSEG data cited by Reuters. More than 80% of the companies that have reported have topped analysts’ profit expectations, versus an average of 76% in the past four quarters.

This week, markets will be keeping an eye on earnings from the likes of economic bellwether Caterpillar (NYSE:CAT), burger titan McDonald’s (NYSE:MCD), and media giant Disney (NYSE:DIS). All of the firms are large members of the blue-chip Dow, which is now hovering just below its record high notched in December.

2. U.S. economic data 

The economic calendar is set to be quieter this week, with a measure of services sector activity on Tuesday likely to be among the most-watched data point.

Last week was marked by a string of pivotal readings that seemed to upend what had been growing hopes that the U.S. economy was weathering possible trade-related headwinds.

One of the most crucial figures came from the Bureau of Labor Statistics, which showed that the U.S. added fewer jobs than anticipated in July. However, much of the reaction to the report swirled around its heavy downward revisions to numbers from June and May, which indicated that the economy’s resilience since Trump’s announcement of elevated "reciprocal" tariffs on April 2 was not as strong as it had seemed.

Stocks fell in the wake of the jobs data, with sentiment also pinned down by Trump’s decision to roll out new heightened tariffs on a range of countries late on Thursday. Trump further exacerbated concerns over the data when he announced the firing of the commissioner of the BLS, citing, without providing evidence, his belief that the numbers were "rigged." A replacement is expected to revealed over the next three to four days, Trump said on Sunday.

3. August 7 tariff deadline looms

The swath of higher levies Trump unveiled last week are due to come into effect on August 7.

Among the slate of tariffs was a 39% levy on Switzerland -- which has reportedly shocked officials and business leaders in the Alpine nation -- as well as a 25% duty on India and 20% on Vietnam.

However, these countries can still negotiate a new trade pact with Washington before the deadline arrives.

Markets may be keeping close tabs on potential talks between Trump and Canadian Prime Minister Mark Carney, in particular. Canada now faces a 35% import tariff on its goods not covered by the U.S.-Mexico-Canada Agreement, a trade deal signed during Trump’s first term in office.

A Canadian official told CBS News over the weekend that Trump and Carney will speak "over the next number of days," adding that a truce to bring down the tariffs remains on the table.

4. More central bank decisions

A slew of global central banks are scheduled to hold policy meetings this week, including those in India and Mexico.

The Bank of England will also deliver its latest decision on borrowing costs, with policymakers tipped to slash the BoE’s key interest rate to 4% from 4.25%. One more reduction is also anticipated before the end of 2025.

However, some division reportedly remains among officials, especially as consumer price inflation hovers well above the central bank’s 2% target level. Uncertainty clouds the outlook for underlying price pressures, as well as the trajectory of the United Kingdom (TADAWUL:4280)’s labor market.

Last week, the Federal Reserve left interest rates unchanged at a range of 4.25% to 4.5%, largely sticking to its recent argument that a wait-and-see approach to policy actions was prudent as the impact of Trump’s tariffs drive becomes clearer.

5. Boeing defense workers set to strike

More than 3,000 unionized workers who build Boeing’s fighter jets in St. Louis, Missouri, are set to go on strike from Monday after they rejected a modified four-year labor contract with the planemaker.

The International Association of Machinists and Aerospace Workers Union said on Sunday that talks with Boeing (NYSE:BA) had fallen through, and that workers under the union were now set to strike starting from Monday.

“3,200 IAM District 837 members at Boeing Defense in St. Louis have voted to reject the company’s latest offer and STRIKE for a fair contract,” the union said in a statement.

Sunday’s vote followed the rejection of an earlier proposal last week, which had included a 20% wage increase over four years.

Monday’s potential strike marks a second major strike for Boeing after over 33,000 West Coast factory workers shut down production for nearly two months in 2024.

The planemaker has been struggling with a slew of production delays and regulatory concerns after a series of high-profile crashes since 2018.