Short On Time… Executive Summary
Well, Powell gave the market what it wanted. A dovish tone. Expect a rate cut in September. Now the market will debate how much the cut should be. I will weigh in on that a little closer to when it is relevant. We’re in the midst of the seasonally most difficult time of year and the market is hanging in there. There are lots of folks waiting for a shoe to drop, but we know the market climbs a wall of worry. So, take the inevitable short-term back and forth for the longer term greater good. The only earnings that matter this week are Nvidia. If they are bullish the market is bullish. The stock market has hitched its wagon to AI and AI doesn’t work (as well) without Nvidia. I think barring some black swan, we continue the march higher into year end.
The Week On Wall Street
Stocks were mixed last week despite a powerful Friday rally sparked by Federal Reserve Chair Jerome Powell, who opened the door to adjusting short-term interest rates.
The Standard & Poor’s 500 Index picked up 0.27 percent while the Nasdaq Composite Index lost 0.58 percent. The Dow Jones Industrial Average rose 1.53 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, increased 0.80 percent.
All Eyes on Powell
Stocks traded in a narrow band to start the week as investors awaited fresh economic data and comments from Fed officials at their annual symposium in Jackson Hole, Wyoming.
After a big retailer reported quarterly results on Tuesday and gave encouraging guidance, stocks pushed higher. But markets took a breather later in the day as pressure on megacap tech and chipmakers led the Nasdaq and the broader market lower. The S&P 500 and Nasdaq fell after minutes from the Federal Reserve's July meeting were published; they revealed that most Federal Open Market Committee (FOMC) members were more concerned about inflation than the job market. On Friday, markets rebounded after Fed Chair Powell opened the door to a rate move at the Fed’s September meeting. The day’s gain was strong enough to regain the week’s lost ground for the S&P and nearly all of it for the Nasdaq—and put the Dow solidly ahead for the week.
Watch the Rotation
Investors appeared to rotate out of megacap tech as some expressed concern about valuations and the durability of the AI-driven rally. Two facts helped support this observation: the S&P fared better than the tech-heavy Nasdaq for the week, and the Russell 2000 Index of small-cap stocks (+3.25 percent) beat all three major stock averages.
The Federal Reserve also rotated a bit. In contrast to the Fed’s July meeting—where inflation was the bigger concern for most Committee members—Fed Chair Powell’s Friday morning speech at Jackson Hole revealed the FOMC was now more concerned with the jobs market.
This Week: Key Economic Data
Monday: New Home Sales. Dallas Fed President Lorie Logan and New York Fed President John Williams speak.
Tuesday: Durable Goods. Case-Shiller Home Price Index. Treasury Buyback Announcement. Consumer Confidence.
Wednesday: Survey of Business Uncertainty. Richmond Fed President Thomas Barkin speaks.
Thursday: Gross Domestic Product (GDP). Jobless Claims (weekly). Pending Home Sales. Corporate Profits. Fed Balance Sheet.
Friday: Personal Consumption & Expenditures (PCE) Index. International Trade Balance in Goods. Retail & Wholesale Inventories. Consumer Sentiment.
This Week: Notable Companies Reporting Earnings
Wednesday: NVIDIA Corporation (NVDA), CrowdStrike (CRWD)
Thursday: Dell Technologies Inc. (DELL)
Stay tuned...
