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Commentary

Fed Meeting, July Employment Report, and More 2Q Earnings

We're keeping an eye on interest rates and earnings from Apple and GE.

As the calendar turns from July to August, investors will have a full plate of important news to digest.

Perhaps the biggest event of the week will be the Federal Reserve policy meeting on Tuesday and Wednesday. Investors are expecting the Fed to announce an interest-rate cut at the conclusion of the meeting to help shore up a slowing U.S. economy.

But the question is, How much of a cut? A month ago, many in the markets were anticipating an aggressive interest-rate reduction of half a percentage point. But following a strong reading on the jobs market for June, expectations appear to have been ratcheted back to a quarter-point reduction in interest rates. Market reaction may hinge on any statements from the Fed that hint toward the possibility of further rate reductions in the months ahead.

The Fed meeting will be followed on Friday by the July employment report. Back in June, the U.S. economy added 224,000 jobs, an unexpectedly strong reading. But with other economic indicators suggesting a slowdown, investors will look to see if the June report was an aberration.

Meanwhile, stock investors will have a slew of second-quarter earnings to wade through, including marquee names such as Apple, which posts results on Tuesday. Apple, which is rated a 3-star stock by Morningstar, is trading just north of Morningstar’s estimate for the stock’s $200 fair value. 

Semiconductor manufacturer Advanced Micro Devices, whose shares are very richly priced compared with Morningstar’s fair value estimate, will also report Tuesday. Semi stocks have been whipsawed this year by the U.S.-China trade tensions. Other big names with earnings due Tuesday are Mastercard, Pfizer, and Merck.

General Electric, a 4-star stock that has seen a rally under new executive leadership, will report Wednesday. Thursday will see 5-star stock Marathon Petroleum report earnings. Energy stocks broadly are one of the few sectors that Morningstar’s equity team sees as undervalued. Morningstar analyst Jeffrey Stafford recently wrote that Marathon has a “compelling long-term story” and that “shareholders should be rewarded with dividend growth and share repurchases.”