A crush of big-cap earnings and arguably the most important economic reports until September combine to make the week ahead the busiest of the summer for markets.
The Fed also meets Tuesday and Wednesday, but it is unlikely to change its message so traders are honing in more on second-quarter GDP Wednesday and the July employment report Friday. There are also reports on home prices, consumer confidence and sentiment readings, monthly auto sales, and ISM manufacturing data.
"This for me is the last key week of the summer," said George Goncalves, head of interest rate strategy at Nomura. The next big event will be when the Fed meets Aug. 22 at its annual symposium in Jackson Hole, Wyoming. Some Fed watchers believe Fed officials will start to discuss their exit strategy and the path to higher rates. Then the next big batch of economic data comes in September, with the release of the August jobs report Labor Day week.
"We want to get a glimpse of what may be in store once things start moving again because we need a catalyst. We don't have any major ones," Goncalves said, adding the geopolitical events will always be a possible catalyst in the background.
"Everyone is desperately seeking [volatility]. They want honest to goodness reinforcing information. Maybe next week is a glimpse of what is in store for the September period when the Fed gets more vocal."
More than 140 S&P 500 companies are scheduled to report earnings in the coming week, with six Dow stocks among them. Big oil—Exxon Mobil and BP—and refiners—Valero, and Phillips 66—report alongside consumer products names like Procter and Gamble, Colgate-Palmolive and Kraft Foods. Pharma—Merck and Pfizer—also report, as do some momentum names like Tesla, LinkedIn and GoPro, making its earnings debut as a public company.
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Focus will also remain on geopolitical risks, as Russia was reported to be shipping arms to Ukraine and Israel widens its ground operation in Gaza.
There is also rising trepidation around the market itself, with the S&P 500 up 7 percent year-to-date and continuing to make new highs. While some analysts have been expecting the market to correct, Goldman Sachs strategists, in a global asset allocation call Friday, recommended going neutral equities for the next three months. They expect a selloff in bonds to lead to a temporary selloff in stocks, but remain convinced stocks are the best positioned asset class over the next 12 months.
Some analysts expect stocks to drift through the summer but react to the Fed's transition away from easing in the fall. The Fed has said it will end tapering its bond buying program in October, and the markets have been sorting out a consensus on when the Fed will begin raising rates. For now, most economists see hikes starting in the middle to third quarter of next year, but the inconsistent economic news has some expecting it later and others sooner.
For that reason, data releases in the coming week could trigger more than usual volatility. Second- quarter GDP, expected to grow at 2.9 percent, is a major release Wednesday. Economists cut forecasts for Q2 Friday after durable goods data showed less core capital goods orders shipments than expected in June. That level of growth—when weighed against the 2.9 percent decline in first- quarter growth—means the economy stood still in the first half, and economists are now concerned there will not be the anticipated spring board from business spending into the second half.
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Employment, however, is expected to continue showing improvement. Economists anticpate 234,000 nonfarm payrolls for July, off from June's 288,000 jobs but the sixth month of 200,000- plus growth. According to Dow Jones, economists also expect the unemployment rate to fall to 6 percent from 6.1 percent.
Economists also are awaiting to hear more from the hawkish Fed members should unemployment drop below 6 percent—once a Fed target to consider rate hikes.
Stocks slumped Friday and Treasury yields fell, with the 10-year yielding 2.46 percent in afternoon trading. The VIX, which represents anticipated volatility on the S&P 500, was nearly 7 percent higher Friday and up 5 percent for the past week. The Dow was lower on the week, off 0.8 percent at 16,960, and the was flat on the week, at 1,978. The Nasdaq was positive, up 0.4 percent for the week at 4,449.
"It's all earnings all the time, and everything else is secondary. You see this in some of the moves—whether it's Visa or Amazon," said Dan Greenhaus, chief global strategist at BTIG. Both stocks sank Friday after disappointing earnings reports.
"You're in a moment where everybody's okay with some of the macro. The Fed is winding down—fine. We'll worry about it next year. The economy appears to be accelerating, not as much as we wanted—but fine," Greenhaus said. "Right now the focus doesn't appear to be on the macro as much as the last six months."
Greenhaus expects the summer to become quiet after the coming week, though unclear what direction stocks will take after earnings wind down. So far this quarter, 69 percent of the 229 companies reporting as of Friday morning were beating earnings estimates, and 63 percent of companies beat revenue forecasts, according to Thomson Reuters. Earnings growth expectations have been improving as reports come in, and S&P 500 companies are now seeing overall profits growth of 6.5 percent.
"August, September and October are always wild cards for stocks," he said. This year, analysts say markets could also react to the theater around midterm congressional elections in the fall.
Goncalves said he expects rates to move lower before they move higher in the fall, and says the 10-year could be trying to carve out a new low for the year at 2.40 or lower. He said the trigger could be a weak economic report or a headline from Ukraine.
"I still think the path of least resistance is to establish a lower low for the year," he said. "It's not a massively lower, low. I think we're going to go under 2.40 in August at some point, and we're going to be sitting there until early September, until we get greater clarity from the Fed and we go back to 2.60…I think if that happens there would be buyers in the wings."
Goldman strategists downgraded corporate credit in its report Friday to underweight over both three and 12 months. "We think spreads will narrow slightly, but given already tight levels, rising government bond yields are likely to dominate the returns especially for US IG credit where spreads are the lowest," they wrote.
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Traders have also been watching flows out of high yield bonds, as a warning sign. "In general, the disconnect we're seeing between equities and high yield and the fact Treasury yields keep rallying—someone out there is worried about something," Goncalves said.
Monday
Earnings: Nissan, Cummins, Tyson Food, Roper Industries, RPM International, Cal-Maine Foods, Tenneco, HealthSouth, General Growth Properties, Eastman Chemical, Owens and Minor, Range Resources, American Financial, Herbalife, Cognex, PartnerRe
10:00 a.m.: Pending home sales
10:30 a.m.: Dallas Fed
1:00 p.m.: $29 billion 2-year note auction
Tuesday
Earnings: Merck, Pfizer, American Express, Twitter, Amgen, BP, UBS, Deutsche Bank, Aetna, UPS, Panera, Dreamworks, US Steel, Anadarko, Marriott, Express Scripts, Newmont Mining, Buffalo Wild Wings, Ruby Tuesday, Corning, Eaton, Illinois Tool Works, Marsh and McLennan, Sirius XM, NY Times, AK Steel, Owens-Illinois
FOMC meeting begins
9:00 a.m.: S&P/Case-Shiller HPI
10:00 a.m.: Consumer confidence
10:00 a.m.: Housing vacancies
1:00 p.m.: $35 billion 5-year note auction
Wednesday
Earnings: Barclays, British American Tobacco, Goodyear Tire, SodaStream, Southern Co, Phillips 66, Thomson Reuters, Nextel, Valero Energy, Tesoro, Hess, Humana, AllianceBernstein, Booz Allen Hamilton, Carlyle Group, Samsung, Kraft Foods, Whole Foods, MetLife, Yelp, Weight Watchers, Shutterfly, Taubman Centers, AMC Entertainment, Boston Beer, Murphy Oil, Cabot, Western Digital, Whiting Petroleum, Agnico Eagle Mines, Allstate, Akamai, Hartford Financial
7:00 a.m.: Mortgage applications
8:15 a.m.: ADP
8:30 a.m.: Q2 GDP
8:30 a.m.: PCE Q2
11:30 a.m.: 2-year floating rate note auction
1:00 p.m.: $29 billion 7-year note auction
2:00 p.m.: Fed statement
Thursday
Earnings: Exxon Mobil, Conoco Phillips, Diageo, Occidental Petroleum, Royal Dutch Shell, Public Storage, Siemens, MasterCard. A-B InBev, AstraZeneca, Sanofi, Tesla, Expedia, GoPro, LinkedIn, Time Warner Cable, Alcatel-Lucent, Apache, Teva, Delphi Automotive, Ball Corp, Becton Dickinson, CME Group, Hyatt, Colgate-Palmolive, Kellogg, Marathon Petroleum, Mosaic, Newell Rubbermaid, McKesson, PG&E, Sony, Avon Products, Beazer Homes, Fortress Investments, Scana, Generac, DirecTV, 3-D Systems, SunPower, Seattle Genetics
8:30 a.m.: Jobless claims
8:30 a.m.: Employment cost index, 2Q
9:45 a.m.: Chicago PMI
Friday
Earnings: Procter and Gamble, Chevron, CBOE, Axa, Calpine, Clorox, ArcelorMittal, Weyerhaeuser
Monthly vehicle sales
8:30 a.m.: Employment report
8:30 a.m.: Personal income and spending
9:55 a.m.: Consumer sentiment
10:00 a.m.: ISM Manufacturing
10:00 a.m.: Construction spending
—By CNBC's Patti Domm