CWS Market Review – July 29, 2025

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The Stair-Step Rally

Lately, the 20-day moving average has been the big star on Wall Street. I have to confess that I usually don’t follow the 20-DMA—it’s just too small.

But now it’s hit the big stage. Why do I say that? Because the S&P 500 has closed above its 20-DMA for the last 66 days in a row. That’s the longest streak in 28 years.

More importantly, looking at the 20-day moving average tells the story of the current market. Namely, the S&P 500 has been steadily moving higher, but very slowly. We haven’t had a 1% daily move in over one month. In five of the last eight trading sessions, the S&P 500 has closed, up or down, by less than 0.15%.

Tiny steps, but steadily upward. That’s been the story of this summer market.

The stock market was down today but not by much. Today was also a good day for many lower volatility stocks. I suspect this trend will continue (with some hiccups).

Frankly, the stock market needs to broaden out. Since April, the S&P 500 Equal Weighted ETF (RSP) has fallen behind the rest of the market. That means that fewer stocks are doing the heavy lifting.

Earnings continue to dominate Wall Street. This week, 164 S&P 500 companies are due to report results for Q2. We’re now about one-third of the way through earnings season and, to be fair, the results are a mixed bag.

For example, more companies are beating expectations, but they’re doing it by less. That tells me that companies are doing a better job of guiding analysts. Earnings growth appears to be tracking higher than expected. Still, this looks to be one of the slowest growing quarters for corporate earnings in a few years.

Let’s look at some numbers (via FactSet). So far, 34% of companies in the S&P 500 have reported earnings. Of those, 80% have beaten expectations. That’s a very strong number. Companies are reporting earnings that are 2.3% above estimates. Historically, that’s not so hot. The five-year average has been 9.1% above expectations.

Overall earnings growth for Q2 is tracking at 6.4%. If that number holds, it will be the closest growth since Q1 of 2024 which was 5.8%.

Wall Street is still optimistic for what’s ahead. For Q3, Wall Street expects earnings growth of 7.6%, and 7.0% for Q4. That works out to full-year earnings growth of 9.6%. That gives the market a forward P/E Ratio of 22.4. That’s pricey. It’s above the 10-year average of 18.4%.

One story of this earnings season is that those that fall short of expectations have been clobbered. According to Bloomberg Intelligence, companies that miss earnings have lost nearly 5% the day after the report. That’s worse much than usual.

This is a very busy week for Wall Street. Obviously, the earnings reports are the big story, but we also have a Federal Reserve meeting. The Fed folks started their two-day meeting today. The Fed will release its policy statement tomorrow at 2 pm ET.

I’ll spoil the drama for you: the Fed won’t make any changes to interest rates. Not this time. After that, however, things get interesting. For now, Wall Street expects a 0.25% rate cut after Labor Day. While this has been expected for some time, it’s not a slam dunk. In the futures market, the odds of a September rate cut are around 66%.

After that, futures traders expect one more cut before the end of the year, and two or three more next year.

Tomorrow, the government will release its first estimate for Q2 GDP growth. This is important because the GDP report for Q1 wasn’t very good. According to BEA, the U.S. economy shrank at a real annualized rate of 0.5% for the first three months of this year. For Q2, the consensus is for growth of 2.3%.

If a Fed meeting, GDP and corporate earnings aren’t enough, we’ll also get the big July jobs report on Friday. Tomorrow, we’ll get a sneak preview when ADP releases its report on private payrolls.

Earlier today, the Labor Department released its report on job openings. There were 7.4 million vacancies last month. That’s down from 7.7 million in May. This is more evidence that the labor market is cooling off.

For Friday, Wall Street expects the unemployment rate to tick up by 0.1% to 4.2%. The expectation is that the economy added 115,000 net new jobs last month. That’s down from 147,000 in June.

In the last report, private payrolls increased by just 74,000. The problem is that state and local governments added 64,000 education jobs. I’m glad to see those folks working but for long-term health, we need to see growth in the private sector.

In 2023, the economy averaged creating over 210,000 new jobs each month. Last year, that fell to an average of 167,000 new jobs. So far this year, the economy is averaging just 130,000 new jobs each month. Friday will probably be more of the same.

I’m also curious to see if wage growth has been holding up well. I think it’s fair to say that the U.S. economy is broadly positive with some areas of concern. For example, many young home buyers have been pushed out of the market.

Possible Stocks for Next Year’s Buy List

It’s still only July, but I wanted to share with you some names that I’m considering for next year’s Buy List.

As usual, our Buy List holds 25 stocks. We don’t make any changes during the entire year. Then at the end of the year, five new stocks are added, and five old stocks are kicked out.

These are 12 stocks that are on my radar. Bear in mind that these are only names I’m currently looking at. There’s no guarantee that they’ll be one of the five I choose in December.

Accenture (ACN)

Cadence Design Systems (CDNS)

Cintas (CTAS)

Costco Wholesale (COST)

IDEXX Laboratories (IDXX)

Labcorp (LH)

Marsh & McLennan (MMC)

McKesson (MCK)

ServiceNow (NOW)

Synopsys (SNPS)

UFP Technologies (UFPT)

Waters (WAT)

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on July 29th, 2025 at 10:10 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.