Daily Market Report August 27th, 2024
After Friday’s rip-roaring upside explosion resulting from Fed Chairman Powell’s statement that interest rate cuts are on the way at the September 18th meeting, the market ended with a split decision yesterday as the Dow reached a new all-time high and the Russell 2000 Index held steady while the S&P and Nasdaq endured a selloff for whatever reason.
The Dow ended with a 65 point gain to 41,240 led by AXP, CAT, 3M and UNH while the Russell ended just about unchanged. The S&P traded lower all session and ended down 18 to 5617 pressured by the large technology issues as everyone awaits the all-important news from NVDA after Wednesday’s close. The Nasdaq was on the weak side with a 152 point selloff to 17,725 on those large technology losses as well such as MSFT and TSLA, in addition to the semiconductors.
The price of U.S. crude oil jumped after Israel and the Lebanese militant group Hezbollah traded heavy fire on Sunday, triggering potential supply worries.
Bond yields held relatively steady. The yield on the 10-year Treasury rose to 3.82% from 3.80% late Friday.
The market gain of the past two weeks helped keep the S&P and Dow within striking distance of notching new highs, which the latter did achieve as mentioned above. Monday’s mixed market finish came at the start of a week featuring another full slate of corporate earnings and the government’s latest inflation reading.
Monday started off with a surprisingly good report showing that durable goods orders from U.S. factories, including cars, jumped by 9.9% in July. An update on consumer confidence is on tap for today and there will be a revised estimate on Thursday of economic growth during the second quarter.
The key report for investors this week will come on Friday, when the government serves up its latest data on inflation with the PCE, or personal consumption and expenditures report, for July. It is the Federal Reserve’s preferred measure of inflation.
Fed Chair Jerome Powell strongly signaled on Friday that the central bank is planning to start cutting its benchmark interest rate, which currently stands at a two-decade high. The Fed raised interest rates in order to tame inflation back to its target of 2%. The final push to the target has been elusive.
Inflation has been steadily easing and economists polled by FactSet expect the latest PCE data to show a 2.6% inflation reading. The PCE was as high as 7.1% in the middle of 2022.
The Fed has been trying to tame inflation by slowing economic growth, but not by so much that it causes a recession. The dynamics of its concerns have shifted.
Traders are forecasting a rate cut to come at the Fed’s meeting in September. They expect the central bank to trim its main interest rate by at least 1 percentage point by the end of the year, according to data from CME Group, which means that they have to go by more than ¼ percent at one of the three remaining meetings in 2024 (September, November and December), so we shall see on that one.
The second-quarter earnings season finally comes to an end this week with more retailers reporting, plus the big one on Wednesday afternoon. The lineup is as follows: yesterday – PDD; today – PVH, BOX and JWN; Wednesday – ANF, CHWY, CRWD, FIVE, HPQ, KSS, NTAP, OKTA, SJM, Dow component CRM and a company that begins with an N and ends in A; Thursday – ADSK, BBY, DELL, DG, GPS, MBD, ULTA.
Economic reports will have: yesterday – July final durable goods orders rose by 9.9%; today – August consumer confidence rose to 103.3 which was the highest since February, June CaseShiller Home Price Index; Thursday – weekly jobless claims, next reading on 2Q G.D.P.; Friday – July personal income and spending, final August U. of Michigan Consumer Spending estimate and then the big one here, namely the July P.C.E. beloved by the Federal Reserve.
By Don Selkin