The Stock Market Faces Next Test as Inflation Looms Over Earnings Season

Investors expect concerns about hot inflation and strapped consumers
to dominate the corporate earnings season that kicks off this week
creating winners and losers in the battered stock market.

Stocks have come under pressure this year with inflation hovering at a
four-decade high in the Federal Reserve in the midst of an aggressive
campaign to raise interest rates to rein it in. The s&p 500 has fallen
18% in 2022 Even after rallying 3% to start July.

Tightening monetary policy has slashed the rich valuations that stocks
carried at the start of the year leading to earnings growth as a key
pillar of support. The reporting season for the second quarter will
mark the latest test for the market as investors assess how profits
have held up and how companies are navigating the second half of the
year.

Companies are battling headwinds on multiple fronts. Elevated input
costs and challenging labor and supply chain environments are weighing
on earnings. Consumer spending has cooled as Americans deal with high
prices at the pump and the grocery store.

And a strong dollar has made our products less affordable. Abroad,
cutting into international sales. It’s going to be a pretty bifurcated
earnings season, said Keith Lerner, co-Chief Investment Officer, and
Chief Market Strategist at truest advisory services. It’s going to be
a story of who doesn’t have that pricing power, and there’s going to
be more differentiation.

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