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What To Expect in the Markets This Week
Stocks are on pace for weekly gains, thanks to this morning’s relatively dovish Powell speech. This week the attention turns to Wednesday’s earnings report from AI darling Nvidia.
Other Potential Market-Moving Catalysts:
Economic:
- Monday (Aug. 26): Durable Goods Orders
- Tuesday (Aug. 27): Consumer Confidence, FHFA Housing Price Index, S&P Case-Shiller Home Price Index
- Wednesday (Aug. 28): EIA Crude Oil Inventories, MBA Mortgage Applications Index
- Thursday (Aug. 29): Advanced International Trade in Goods, Advanced Retail Inventories, Advanced Wholesale Inventories, Continuing Claims, EIA Natural Gas Inventories, GDP – Second Estimate, Initial Claims, Pending Home Sales
- Friday (Aug. 30): PCE Prices, Personal Income, Personal Spending, University of Michigan Consumer Sentiment – Final
Earnings:
- Monday (Aug. 26): PDD Holdings (PDD), HEICO Corp. (HEI), Trip.com Group (TCOM)
- Tuesday (Aug. 27): American Woodmark Corp. (AMWD), SentinelOne Inc. (S), PVH Corp. (PVH), Box Inc. (BOX), nCino Inc. (NCNO)
- Wednesday (Aug. 28): Li Auto (LI), JM Smucker (SJM), Chewy Inc. (CHWY), Abercrombie & Fitch (ANF), Foot Locker (FL), NVIDIA Corp. (NVDA), Salesforce Inc. (CRM), CrowdStrike Holding (CRWD), HP Inc. (HPQ), Veeva Systems (VEEV), NetApp (NTAP)
- Thursday (Aug. 29): Dollar General Corp. (DG), Best Buy Co. (BBY), Burlington Stores (BURL), Dell Technologies (DELL), Marvell Technologies (MRVL), Autodesk (ADSK), Lululemon Athletica (LULU), MongoDB (MDB), Ulta Beauty (ULTA)
- Friday (Aug. 30): JinkoSolar Holdings Co. (JKS), Frontline PLC (FRO)
Economic Data, Rates & the Fed:
This week’s economic high light was this morning’s speech from Fed Chairman Jerome Powell at the Jackson Hole Economic Symposium. Powell delivered a clear message to the markets that the “time has come” to adjust policy begin cutting interest rates. And in familiar Fed fashion, Powell added, “and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” The message is backed by the Fed’s acknowledgement of a decrease in the upside risks to inflation coupled with an increase in the downside risks to job gains. While the message was largely “as expected” based on rate cut probabilities from the market, stocks responded positively following the message delivery. Outside of Jackson Hole, the other economic data this week was supportive of a healthy U.S. economy. Here’s the breakdown from this week’s reports:
- S&P Manufacturing PMI: 48.0, below the 49.6 expected and down from the prior read of 49.6.
- S&P Services PMI: 55.2 vs. 54.0 expected and slightly above the prior read of 55.0.
- New Home Sales: increased 10.6% month-over-month (MoM) to 739K, above the 624K expected. The 10.6% MoM increase is the largest gain since August of 2022.
- Initial Jobless Claims: 232K, slightly above the 230K expected, and up from 228K in the prior week. Continuing Claims came in at 1.863M, up slightly from (downwardly revised) 1.859M last week, but below the 1.870M economists expected. This week’s Continuing Claims represents the highest level for insured unemployment since November of 2021.
- The Atlanta Fed’s GNPNow forecast for Q2 was revised down to 2.0% last Friday and it has remained at that level this week (next Thursday we’ll get the second estimate for Q2 GDP, the advanced reading was 2.8%).
Bond yields are fell modestly on a week-over-week basis, mostly driven by Powell’s speech. Two-year Treasury yields are down to 3.93% versus 4.054% last Friday while 10-year Treasury yields are currently 3.812%, down slightly from 3.892% last Friday.
Markets expectations around potential rate cuts from the Fed modestly ticked up this week, mostly helped by Powell’s relatively dovish message. The Bloomberg probability of a 50-basis-point rate cut in September is up to 33% from 30% last Friday, and above yesterday’s level of 25%. The probabilities are currently suggesting 75-100 basis points for the remainder of the year. (Schwab)