US markets edge higher amid EU trade deal, Fed meeting and earnings season

US stock markets ended mixed on July 28, with the S&P 500 edging higher to hit its sixth consecutive record close, while the Dow Jones Industrial Average slipped slightly. The Nasdaq Composite also closed at a record, despite choppy trading, as investors focused on multiple market catalysts, including a US-EU trade agreement, upcoming Federal Reserve policy decisions, and a busy earnings season. The S&P 500 rose 1.13 points, or 0.02 per cent, to close at 6,389.77. The Nasdaq gained 70.27 points, or 0.33 per cent, settling at 21,178.58. However, the Dow Jones fell 64.36 points, or 0.14 per cent, finishing at 44,837.56. The market’s performance reflected mixed reactions to the weekend’s US-European Union trade deal and cautious optimism for the upcoming economic data.

Muted market reaction to US-EU trade pact

On July 27, US President Donald Trump and European Commission President Ursula von der Leyen unveiled a trade framework that slashes EU import tariffs to 15-20 per cent, significantly lower than the previously threatened 30 per cent rate. While this deal averted the worst-case scenario for US-EU relations, the market’s response was tepid, with investors seeing the deal as less impactful than anticipated.

Although the deal may provide some relief by easing tariff uncertainty, there is scepticism about its long-term implications. French officials have criticised the agreement as a “submission,” pointing out that it doesn’t go far enough in addressing trade imbalances. Scott Welch, chief investment officer at Certuity, noted that while the trade deal was better than the alternative, it’s still too early to assess its full effects on the global economy.

Earnings season and Fed decision in focus

With the market digesting the trade agreement, investors are now turning their attention to the Federal Reserve’s policy meeting and earnings reports from major companies. The Fed is widely expected to keep interest rates unchanged during its two-day meeting, which concludes July 30. Traders will be looking for any hints about potential rate cuts in September.

Corporate earnings are also front and centre this week, with over 150 S&P 500 companies set to report quarterly results. Tech giants Meta Platforms, Microsoft, Amazon, and Apple are all scheduled to release earnings, and their performance could influence market sentiment. A strong showing from these companies could provide much-needed momentum, especially after a mixed reaction to the US-EU trade deal.

In addition to the Fed’s decision and earnings, key economic data this week includes the Personal Consumption Expenditure (PCE) inflation report and the jobs report. Economists expect the economy to have added 102,000 jobs in July, down from 147,000 in June. This will give investors further insight into the state of the labour market and the potential impact of tariffs on consumer prices. With tariff uncertainty easing somewhat and corporate earnings potentially outperforming expectations, the market is set for another week of volatility as traders weigh the long-term effects of trade deals and economic policy decisions.

(With inputs from agencies)