The Week in Review: 8/26/24

"There cannot be a crisis next week, my schedule is already full." – Henry Kissinger

Good Morning,

The stock market exhibited mixed action at the index level last week but finished the week with very decent gains.

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 1.4% 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.

Summer is winding down and August is known for being volatile, as many traders are finishing their vacations and trading floors are thin.

Last 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.

According to CME’s FedWatch Tool, odds implied from futures market trading are split between the two options, with a 65% chance of a 25 bps. cut and 35% chance of a 50 bps. cut in September, while subsequent cuts are predicted to come as soon as November.

The markets 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.

Last 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.

We saw breadth expand in a broad advance in the equity market last week. 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%.

Market Snapshot…

• Oil Prices - Oil futures rose but prices fell for the week. West Texas Intermediate crude was up $1.82 or 2.49% to $74.83 a barrel, while Brent crude futures was up $1.80, or 1.68% to $79.02 a barrel.
• Gold - Gold prices climbed amid rate cut expectations. Spot gold was up 1.15% to $2,2,511.91 per ounce. U.S. gold futures rose 1.19% to $2,546.70. Silver closed out the week at $29.82.
• U.S. Dollar - The dollar dropped as the Fed’s appetite for interest rate cuts increased. The dollar was down 1.36% to 144.27. Euro/US$ exchange rate is now 1.117.
• U.S. Treasury Rates - The U.S. 10-year Treasury yield slid down 6 basis points to 3.801%.
• Asian shares were mixed in overnight trading.
• European markets are trading mostly higher.
• Domestic markets are again trading in the green this morning.

This week we will receive a second look at second quarter GDP and July’s PCE report. The PCE report will be the first of two inflation reports received before the next Fed meeting.

Earnings season will also continue winding down. We will hear from Salesforce, Nvidia, and Best Buy, among others.

Have a great week!!

Michael D. Hilger, CEP®

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