S&P 500 Ends Flat as Investors Focus on US-EU Trade Deal, Fed Meeting, and Big Tech Earnings
The S&P 500 closed flat on Monday, as investors weighed the impact of a new U.S.-EU trade agreement and braced for a week full of key economic data and earnings reports from the ‘Magnificent Seven’ tech giants. The Federal Reserve’s policy decision later this week is also in sharp focus.
As of 4:00 p.m. ET (20:00 GMT), the Dow Jones Industrial Average fell 64 points, or 0.1%, the S&P 500 remained unchanged, while the NASDAQ Composite rose 0.3%.
US and EU Reach Landmark Trade Agreement
Over the weekend, the United States and the European Union announced a new trade framework. The deal includes a 15% tariff on EU goods imported to the U.S. and lays the groundwork for significant EU investments in U.S. energy and defense sectors.
According to the agreement, the EU has committed to:
- Purchasing $750 billion in U.S. energy, and
- Investing $600 billion in the U.S. economy.
This comes amid increasing market concerns about upcoming reciprocal tariffs, set to take effect on August 1 if no written deal is signed.
ING analysts noted, “The big caveat to today’s deal is that there is nothing on paper yet. The coming days should bring more clarity.”
Fed Policy Meeting and Inflation Data in Focus
The Federal Reserve begins its two-day policy meeting this week, concluding on July 30. Interest rates are expected to remain between 4.25% and 4.5%, but investors will be watching for any signals pointing to a possible rate cut in September or December.
ING analysts predict no rate cut this month, but expect the Fed to start laying the groundwork for easing later this year.
In addition to the Fed, the Bank of Japan will meet on Thursday, just ahead of the release of June’s PCE price index, the Fed’s preferred measure of inflation.
Investors are also monitoring key U.S. labor data:
- JOLTS report on Tuesday
- ADP private payrolls on Wednesday
- Jobless claims on Thursday
- July non-farm payrolls on Friday
Magnificent Seven Earnings in the Spotlight
This week marks the peak of Q2 earnings season, with over 150 companies in the S&P 500 set to report.
Among the ‘Magnificent Seven’ tech firms, the following are scheduled:
- Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT) on Wednesday
- Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) on Thursday
Investors are particularly interested in updates on AI-related spending, which could determine if recent heavy investments in hyperscalers are justified.
Market Commentary and Analyst Outlook
Morgan Stanley’s equity strategist Michael Wilson projects the S&P 500 could hit 7,200 by mid-2026, citing a “rolling recovery” in corporate earnings and strong macroeconomic support.
Wilson wrote, “We’re leaning toward our bull case—7,200 by mid-next year—based on 22.5x forward EPS of 319.” He also emphasized solid earnings growth potential, supported by Morgan Stanley’s proprietary earnings model.
Stocks on the Move
- Tesla Inc (NASDAQ: TSLA) jumped 4% after CEO Elon Musk revealed a $16.5 billion chip deal with Samsung. The semiconductors will be used in Tesla’s upcoming AI and EV technologies.
- Nike Inc (NYSE: NKE) rose 4% after JPMorgan upgraded the stock to overweight from neutral, citing confidence in the company’s ongoing recovery.
- Cisco Systems (NASDAQ: CSCO) dropped nearly 2% after Evercore downgraded the stock from “outperform” to “in line,” saying most of the upside is already priced in.
