Stock Market Update

[BRIEFING.COM] The stock market surged toward record high levels in a rally fueled by dovish interpretations of Fed Chair Powell’s highly anticipated Jackson Hole speech. After a choppy week dominated by uncertainty around the September FOMC meeting, Powell’s comments gave investors confidence that a rate cut is likely on the near-term horizon.

Mr. Powell’s line noting that “with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance” was viewed by markets as a green light for easing. The probability of a 25-basis point rate cut at the September FOMC meeting now stands at 89.3%, up from 75.0% yesterday and back above the 85.4% level from a week ago, according to the CME FedWatch tool.

Meanwhile, commentary from Cleveland Fed President Beth Hammack (non-voting FOMC member) struck a more hawkish tone. In a CNBC interview, she stressed that while she is open-minded heading into September, her focus remains on inflation, where she feels the Fed is still missing badly on its mandate.

Nonetheless, the DJIA (+2.1%) established a new all-time high level in the resulting rally, with the S&P 500 (+1.5%) coming within three points of its own intraday record. The tech-heavy Nasdaq Composite (+1.7%) is now the only one of the major averages that still faces a week-to-date loss (-0.8%).

Breadth figures reflect the scope of the rally. Advancers outpace decliners by a nearly 12-to-1 margin on the NYSE and a nearly 6-to-1 clip on the Nasdaq.

Sector performance is also decidedly strong, with ten S&P 500 sectors trading in positive territory. The consumer discretionary (+2.7%), energy (+2.0%), materials (+2.0%), and industrials (+2.0%) sectors lead the way, with only the defensive consumer staples sector (-0.3%) holding a modest loss.

It is worth noting that the information technology (+1.3%) and communication services (+1.4%) sectors also capture nice gains, though earlier weakness in their mega-cap constituents leaves them as the only two S&P 500 sectors with week-to-date losses. 

Mega-caps are keeping pace with the broader market, with the Vanguard Mega Cap Growth ETF higher by about 1.3%.

Meanwhile, the small-cap Russell 2000 (+3.8%) and the S&P Mid Cap 400 (+2.9%) are out in front, reflecting a risk-on sentiment as the market now expects a friendlier future rate environment.

Other standouts include the iShares U.S. Home Construction ETF (+5.3%) and the PHLX Semiconductor Index (+2.9%).

Overall, today’s rally is on track to deliver the strongest session of an otherwise choppy week, restoring market momentum as it heads into the final days of the month.

There was no economic data of note today.