Stocks Tick Higher Ahead of June CPI, Q2 Earnings Season

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Stocks failed to make any major moves Monday as investors looked ahead to this week's inflation data and the start of second-quarter earnings season.

Technology and communication services stocks lagged, hurt by weakness in several mega-cap names like Apple (AAPL, -1.1%), Microsoft (MSFT, -1.6%) and Alphabet (GOOGL, -2.5%), while industrial stocks outperformed.

At the close, the blue chip Dow Jones Industrial Average was up 0.6% at 33,944 on strength in healthcare stock Amgen (AMGN, +2.8%), the S&P 500 was 0.2% higher at 4,409, and the tech-heavy Nasdaq Composite had gained 0.2% to 13,685.

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Investors are waiting for Wednesday morning's release of the June Consumer Price Index (CPI) report to give potential clues to the Federal Reserve's future monetary policy plans. Both San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester said today that more rate hikes are needed to bring inflation down to the central bank's 2% target.

Following last week's mixed June jobs report, futures traders are now pricing in a 92.4% chance of a quarter-point rate hike at the next Fed meeting later this month, according to CME Group.

Meanwhile, the second-quarter earnings calendar gets rolling on Friday with several big banks set to report. This earnings season is likely to be volatile, says Megan Horneman, chief investment officer at Verdence Capital. "In order for the recent rally to be sustainable we need to see a better outlook for earnings and improvement in the economy," Horneman notes, "otherwise, valuations, especially in select sectors, are too high."

Analysts blast CAVA with Buy ratings

In single-stock news, Cava Group (CAVA) jumped 11.1% after several analysts initiated coverage on the Mediterranean restaurant stock following its June initial public offering (IPO). Jefferies, Stifel and Baird were among those giving CAVA a Buy or equivalent rating.

William Blair analyst Sharon Zackfia also started coverage on Cava Group with an Outperform (Buy) rating. "CAVA has hit upon a winning formula with its customizable menu of bowls and pitas featuring bold Mediterranean flavors that can fit in any dietary preference," Zackfia wrote in a note to clients.

Best bond funds to buy

Coming off a rough 2022, the bond market has had a solid run so far this year. Nearly all major fixed-income sectors finished the first half in positive territory due in part to falling long-term yields and uncertainty sparked by the regional banking crisis that occurred in the spring, says Sam Millette, fixed income strategist for Commonwealth Financial Network. The strategist adds that the second-half outlook for bonds remains "positive," and he sees "compelling options across several sectors," including in investment-grade bonds.

"The economic data continues to paint a relatively positive picture, which should help support company fundamentals for investment-grade corporations," Millette says. However, because corporate bonds are backed by the financial health of their corporate issuers, the strategist adds that investors should be aware of "fundamentals like profitability, debt and growth potential" that can impact long-term performance when considering allocations.

While investing in individual bonds is impractical for retail investors, bond funds and bond ETFs allow them to gain exposure to fixed-income assets. Here, we've compiled a list of the best bond funds to buy now that cover a wide variety of categories and create diversification for income investors.

With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.