Weekly Wrap

The stock market exhibited mixed action at the index level this week. Some sessions featured downside moves driven by consolidation activity, and some sessions featured robust buying. Like recent weeks, buying activity was driven by the notion that the Fed will lower rates beginning in September. 

Ultimately, the S&P 500 settled 1.5% higher, the Nasdaq Composite jumped 1.4%, and the Russell 2000 closed 3.6% higher than last Friday. This price action left the S&P 500 just 0.6% below its all-time high. Volume was below-average through most of the week, reflecting a lack of participation due to vacation schedules and some hesitation ahead of potentially influential events. 

This week's lineup was headlined by Fed Chair Powell's speech at the Jackson Hole Economic Symposium on Friday, which was dovish sounding and acknowledged that "the time has come for policy to adjust." Earlier in the week, the FOMC Minutes from the July 30-31 meeting were highlighted by the Fed's comments that a rate cut was "plausible" at the meeting. 

The market brushed off the release of revisions to nonfarm payrolls for the April 2023-March 2024 period, which showed that there were 818,000 fewer nonfarm payroll positions than previously thought, creating some concern that the labor market has been softening for a longer period than previously thought.

This week's calendar also featured some slightly worse than expected initial jobless claims, some weaker than expected preliminary manufacturing PMI data for August, some stronger than expected preliminary Services PMI data for August, and some better than expected existing home sales for July, which were up 1.3% month-over-month but still down 2.5% year-over-year.

Many stocks participated in a broad advance in the equity market. The equal-weighted S&P 500 jumped 2.1% and ten of the 11 S&P 500 sectors registered gains. The lone sector to log a decline was energy (-0.5%) while the rate-sensitive real estate sector (+3.6%) registered the biggest gain.

Other top performing sectors included the materials (+2.4%), consumer discretionary (+2.1%), and industrial (+1.8%) sectors. 

The 10-yr note yield dropped eight basis points this week to 3.81% and the 2-yr note yield settled 16 basis points lower at 3.91%.

Monday:

The stock market entered the new week with a continuation of last week's rally. A last minute push higher had the S&P 500 (+1.0%), Nasdaq Composite (+1.4%), Dow Jones Industrial Average (+0.6%), and Russell 2000 (+1.2%) hit new session highs ahead of the close. Monday's action left the S&P 500 1.1% below its all-time high.

Volume was below-average at the NYSE today as investors wait on potentially market-moving events this week.

Participants are looking for Mr. Powell to corroborate the market's optimistic views on economic growth, the labor market, and rate cuts beginning in September, which have driven recent upside moves in equities.

Influential economic releases include the weekly initial jobless claims and existing home sales report for July on Thursday and the new home sales report for July on Friday.

Monday's economic data was limited to the Leading Indicators Index, which dropped 0.6% in July (Briefing.com consensus -0.3%) following a 0.2% decline in June.

Tuesday:

The stock market acted as if it was biding its time in front of some key happenings that should make for more excitable trading action in Wednesday's trade. In terms of Tuesday's trade, it featured modest losses for the major indices that broke an eight-session winning streak for the S&P 500 and Nasdaq Composite.

It was effectively a consolidation trade with neither buyers nor sellers showing a great deal of conviction at the index level.

Home improvement retailer Lowe's (LOW) was a story stock, losing ground after issuing disappointing FY25 guidance, yet its losses were not material.

The Treasury market put together a nice day with yields sliding across the curve. Participants engaged the notion that many of the world's leading central banks -- and the Federal Reserve in particular -- are shifting (or soon will be) to a less restrictive policy stance.

The impending shift for the Fed, which has held rates higher for longer than other central banks, continues to take a toll on the dollar, which lost ground against the euro, the yen, and pound sterling again.

There was no U.S. economic data of note Tuesday.

Wednesday:

The stock market was back on a winning track after modest declines on Tuesday, which broke an eight-session winning streak for the S&P 500 and Nasdaq Composite.

Volume was below-average at the NYSE again, reflecting an ongoing lack of conviction.

Wednesday's release of revisions to nonfarm payrolls for the April 2023-March 2024 period, which ultimately garnered a muted response from equities, showed that there were 818,000 fewer nonfarm payroll positions than previously thought, creating some concern that the labor market has been softening for a longer period than previously thought.

The stock and bond markets also had muted reactions to today's $16 billion 20-yr bond auction, which met good demand, and the release of the minutes from the July 30-31 FOMC meeting. The minutes were highlighted by the Fed's comments that a rate cut was "plausible" at the meeting, suggesting a September cut was all but guaranteed.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications Index -10.1%; Prior 16.8%

Thursday:

There was a negative bias in Thursday's session. The selling activity was driven by some normal consolidation interest after a solid run for the major indices. The selling activity was driven by some normal consolidation interest after a solid run for the major indices.

Thursday's economic data didn't garner a big response from stocks. The lineup featured some slightly worse than expected initial jobless claims, some weaker than expected preliminary manufacturing PMI data for August, some stronger than expected preliminary Services PMI data for August, and some better than expected existing home sales for July, which were up 1.3% month-over-month but still down 2.5% year-over-year.

Friday: 

Stocks started the final session of the week on an upbeat note, building on gains after Fed Chair Powell's dovish sounding comments at the Jackson Hole Economic Symposium. Mr. Powell all but confirmed that a rate cut is coming in September, acknowledging that "the time has come for policy to adjust."

The upside bias was also supported by strength in the semiconductor space and a drop in Treasury yields.

Reviewing Friday's economic data:

• New home sales surged 10.6% month-over-month in July to a seasonally adjusted annual rate of 739,000 units (Briefing.com consensus 628,000) from an upwardly revised 668,000 (from 617,000) in June. On a year-over-year basis, new home sales were up 5.6%.
  • The key takeaway from the report is that new home sales, which are tabulated when contracts are signed, saw an encouraging jump in July that coincided with mortgage rates coming down.