Last Week’s Summary
- S&P 500 Index rose 1.47%
- International Equities rose 2.15%
- Emerging Markets rose 0.70%
- U.S. 10-Year Treasury Yield fell to 3.79%
- Leading Index fell to -0.6%
- MBA Mortgage Applications rose to -10.1%
- Initial Jobless Claims rose to 232k
- S&P Global US Manu. PMI fell to 48
What to Watch for This Week
- M, 8/26/24 Durable Goods Orders
- T, 8/27/24 Conf. Board Consumer Confidence
- W, 8/28/24 MBA Mortgage Applications
- Th, 8/29/24 Initial Jobless Claims, GDP
- F, 8/30/24 Personal Income, Personal Spending, PCE, PCE Core, U. of Mich. Sentiment, MNI Chicago PMI
Weekly Market Recap
Stocks climbed while bond yields fell as Jerome Powell reinforced expectations that the Federal Reserve will cut interest rates in September, though he left the door open for further cuts. Wall Street had already anticipated the start of policy easing next month, but Powell’s statement that “the time has come” confirmed those expectations.
However, there were other significant points in his Jackson Hole speech that shouldn’t be overlooked. Firstly, the Fed Chair acknowledged recent progress on inflation. He also noted that the economy is growing at a “solid pace,” which is reassuring after recent concerns about economic growth.
Yet, it was his emphasis on a “cooling labor market” that caught the attention of many market observers. This was interpreted as a sign that the Fed is determined to prevent a sharp economic downturn. Swap traders maintained their pricing for the total rate cuts expected through the end of 2024, around 100 basis points. The odds also held steady for a quarter point cut in September.
A more significant softening of the labor market than previously expected could prompt faster and steeper interest rate cuts by the Fed. This would likely bring the federal funds rate down by more than 100 basis points by the end of this year-compared to the 50 basis points decrease that was priced in as of July.
Next week’s PCE report will likely provide more insight into how swiftly the Fed might adjust its policy stance and the pace at which it will cut rates.
60-Second Breakdown
Redwood Senior Analyst Michael C. Sasaki, CFA® discusses recent market performance and explains this week’s chart.
