Markets – Economy – Earnings
The S&P 500 continues to flirt with all-time highs, yet we’re seeing signs of negative divergence on the RSI indicator. Simply put, this means momentum isn’t confirming the move higher in prices—often a signal of potential weakness ahead. Valuations also remain stretched, with the market up nearly 27% since the April lows. Taken together, we believe a pullback could be on the horizon. If we had to assign a number, we’d expect a retracement in the 4%–8% range.
Earnings season kicked off this week, with major banks leading the way. While results were generally solid, several reported a decline in Net Interest Income. The bulk of S&P 500 earnings will arrive over the next few weeks. Expectations are relatively muted, with analysts forecasting around 5% earnings growth. One key area we’re watching is how company management teams are addressing tariffs and their broader economic impact.
The overall economic picture remains healthy. Headline inflation came in largely in line with expectations, while core CPI rose 2.9% year-over-year—slightly below consensus. Meanwhile, PPI surprised to the downside, in part because it excludes import prices. With inflation elevated but stabilizing, the Fed is likely to remain on the sidelines until signs of labor market weakness emerge.
Retail sales exceeded expectations, marking the strongest reading since March. Jobless claims also continue to trend lower. Still, we remain cautious on the labor market. While companies have clearly slowed hiring, they’ve also been hesitant to implement widespread layoffs. The latest Fed Beige Book showed modest improvement in economic activity—but that progress came alongside increased pricing pressures.
Looking ahead, this week’s economic calendar includes:
Monday: Leading Economic Indicators
Wednesday: Existing Home Sales
Thursday: Jobless Claims & Building Permits
Friday: Durable Goods Orders
Be sure to join us this Friday for our Live Market Discussion on Facebook, where we’ll break down the week’s developments and share our latest market outlook.
– HPK Provident Advisors
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts may not develop as predicted.