The highlight of last week was Federal Reserve Chair Jerome Powell’s commentary at the annual Monetary Policy Symposium in Jackson Hole, Wyoming. Stock prices rallied Friday after the release of his prepared remarks, with the Dow Jones Industrial Average going on to rise over 460 points on the day, while the Standard & Poor’s 500 Index and the NASDAQ Composite added nearly 1.2% and 1.5%, respectively.
For the week in total – the three major stock market averages all rose approximately 1 ½ percent. Small cap stocks led the way, with the Russell 2000 gaining over 3%. Investors were encouraged and the rally was fueled by near certainty the Federal Reserve will be cutting interest rates at their policy meeting next month. Chair Powell stated, “the time has come for policy to adjust,” indicative of the Dovish(accommodative) shift investors have been waiting for. The Fed and Powell have clearly solidified expectations for a rate cut.
According to CME FedWatch – the probability for an interest rate cut by the Fed next month is 100% – broken down into a 67.5% chance for ¼ percentage point interest rate cut and a 32.5% chance for an ½ percentage point interest rate cut. The market breathed a sigh of relief after Chair Powell spoke and is taking a positive/happy view about the upcoming interest rate cut. For some perspective on timing and recent history, this will be the first interest rate cut since 2020.
Looking to the week ahead, get ready for two big and highly anticipated data points, the Personal Consumption Expenditures (PCE) report and earnings from NVDA. On Friday morning, the Bureau of Economic Analysis is expected to report the PCE for July, (the Fed’s preferred measure of inflation), increased 2.6% on a year-over-year basis. That would be 1/10of a percent less than the previous reading, and indicative of inflation continuing to cool. Before that, the market is intently focused on a major earnings report.
Nvidia reports their latest quarterly results after the closing bell on Wednesday. Even more important than those actual results, however, the market will be intently focused on their forward guidance and outlook. Nvidia has been a dominant part of the overall market rally and the poster child of Artificial Intelligence. Their report could set the tone for not only technology and AI, but also for the stock market in general.
As always, please call us with any questions you may have or if you would like to schedule a meeting.
All the best – Southport Station Financial Management, LLC