Day Traders Diary

8/1/22

The major averages are lower to start the week and month following the market's best month since 2020 as investors look ahead to another week of key earnings reports and economic data. The Dow Jones Industrial Average is set to decline 89 points, or 0.27%. The S&P 500 is down 17 points while the Nasdaq is down 44 points or 0.34.

On Friday, all major indexes gained, posting winning weeks and capping off the best month of the year so far and then some. The Dow gained 6.7% in July, while the S&P 500 added 9.1%. The Nasdaq Composite rose 12.4% as investors rushed into the tech stocks beaten up the most during this bear market. For each index, July's performances were the best since 2020.

This week, investors have more economic data and company earnings to digest. On Monday, companies such as Activision Blizzard, Devon Energy, Loews and more report earnings. Later in the week Uber, Caterpillar, Starbucks, Eli Lilly, Amgen and others also have scheduled reports.

In addition, the Friday nonfarm payrolls report from the Bureau of Labor Statistics will give more insight into the strong labor market. So far this year, the solid growth of jobs has prompted economists to say the U.S. is currently not in a recession, even with two consecutive quarters of negative GDP.

During the prior five recessions except in 1990, the S&P 500 bottomed after estimates were revised down, but today, estimate cuts are just starting and forward earnings per share is still up 7% since the market peak, the strategist said.

Secondly, Bank of America's bull market signposts indicate it's premature to call a bottom. Subramanian said historical market bottoms were accompanied by over 80% of these indicators being triggered, and now just 30% are triggered.

Lastly, she said bear markets always ended after the Federal Reserve started to cut interest rates, which is a scenario that's at least six months away.