The three major Wall Street indices notched new highs for the week (6-9 July) for a second record-breaking week in a row with both the S&P 500 and Nasdaq Composite inching up by 0.4% and the Dow by 0.2%. It was the S&P’s sixth week of gains in seven.

US equities had rebounded on Friday from the only day of decline on Thursday during a shortened 4-day trading week amid rising concerns that spikes in the more contagious Delta coronavirus strain across the globe will put the skids on recovery growth as global Covid-19 deaths crossed the 4 million mark.

It had taken 82 days to chalk up the latest 1 million fatalities compared to 92 for the last million, according to the John Hopkins University. The Delta variant now accounts for 90% of new cases in the UK and increasingly in the US with case counts up in 27 states during the past week.

The World Health Organisation (WHO) has meanwhile warned of “a perilous point in the pandemic” if the target of 10-12 billion doses are not met this year with vaccination rates in most emerging countries still underwhelming at below 2%.

The US 10-year bond yield had ended the week at 1.36% for a second week of decline (after dropping as low as 1.25% during the week) perhaps signalling that US growth has peaked and inflation is not a big concern as feared earlier, as well as views that the Fed is unlikely to raise rates anywhere close to past peak cycles. The Fed minutes for June in midweek had also not shown any strong indications of the US central bank looking to rein in its monthly $120 billion bond purchases.

The week ahead will see if the market will react any stronger to inflation prints and data such as both the producer price (PPI) and consumer (CPI) indexes, US jobless claims, business inventories, retail sales and a gauge of consumer sentiments from the University of Michigan.

The second-quarter earnings reporting season also gets underway this week with profits for S&P 500 companies expected to report an aggregate rise of 65% from a year ago.

The increase will likely spike to near 570% for industrials which was one of the hardest hit sectors during the pandemic last year, according to Refinitiv, which noted that other sectors – consumer discretionary (271%), energy companies (225%) and materials (115%) will also see blowout post-pandemic profit gains.

The big US banks are also expected to show similar year-on-year, over-the-top results with investors awaiting to benefit from dividend payouts after the Fed loosened restrictions following bank stress tests, while techs which were the chief beneficiaries from the pandemic are expected to rise by 31.6% in earnings.

Across the Atlantic, MSCI Europe companies are expected to also post strong gains in aggregate profits (109%) as the Eurozone recovery from Covid-19 had been behind that of the US.

Overall, the expectations are that while earnings growth will moderate, S&P profits will still advance by double digits in the next two quarters – but with the peaking in both economic and earnings growth, there will likely be a rise in volatility featuring bouts of profit taking as well as buying on dips.

Investors will also likely be pickier within sectors that are expected to do well while looking at secular growth companies, especially those who can pass inflation-related costs with techs likely having the edge over reflation trades in a lower US yield environment.

Over in Asia, China’s central bank had announced a half a percentage point cut to banks’ reserve ratio requirements (RRR) stirring concerns about the health of banks’ balance sheets following a debt-fueled property boom.

Investors will be looking at Chinese second-quarter GDP figures this week – expected to weigh in at about 8% compared to the 18.3% annual gain for the first quarter – as well as June industrial and retail figures to assess whether growth has moderated amid concerns over the increase in regulatory oversight over Chinese e-commerce companies including those listed abroad.

The CSI 300 had retreated by 0.4% on Friday, taking the Shanghai and Shenzhen indices down by almost 3% for the month to date. Taiwan’s leading chipmaker, TSMC’s second-quarter results will be released on Thursday.