Greece and China to influence Fed meeting next week

Fed-speak, earnings, and macro data will shape domestic market influences in addition to high spillover risk from developments overseas. When Federal Reserve Chair Janet Yellen delivers her semi-annual Monetary Policy Report to Congress and testifies on Wednesday and Thursday, her views on international risks will be further informed for better or worse on the basis of Sunday's EU Summit on Greece and Tuesday's Chinese GDP print. This may drive updated rate guidance ahead of the July 29th FOMC meeting. 

Earnings risk will also factor into the week's market tone. 43 firms that are listed on the S&P500 index will accelerate the Q2 earnings season. Much of the focus will be upon financials including JP Morgan, Wells Fargo, BlackRock, Bank of America, Goldman Sachs, and Citigroup. Among the other names on the schedule are Intel, GE, Google, Mattel, eBay, Netflix, and Johnson & Johnson.

Macro data risk may also figure prominently on the week, particularly on two counts that may conflict with one another from a market standpoint. Tuesday's retail sales for June are facing an uphill climb to post headline growth. That's because we already know that vehicle sales fell in June but from about a nine-year high with the level of sales remaining cycle-elevated.

Gasoline prices were a little higher in June over May and may help a touch, given that we're only dealing with the change in the dollar value of sales until CPI arrives later in the week and we can then separate price and volume effects on retail sales. Thus, the second main release of the week will be Friday's inflation reading. The small rise in gasoline prices and underlying resilience in core prices ex-food and energy may be enough to continue lifting CPI inflation into mildly positive yearago headline readings on the path to around 2% into early next year.

Macro releases of lesser significance will include industrial production that could rebound from the prior month's small dip, the Philly Fed's regional business gauge that will be watched for further signs of an uptrend, housing starts that have been wickedly volatile this year and could post renewed monthly growth, and the University of Michigan's consumer sentiment reading that has been running around the highest readings since before the crisis so far this year. 

American consumer confidence is proving to be resilient to international headlines perhaps in part because the spillover effects include lower bond yields and borrowing costs. The 30 year fixed mortgage rate, for example, has fallen by a quarter point back down to 4% since it peaked in late June due to Greece and China, says Scotia bank.