There were signals of some uncertainty about the pace of future rate cuts, which slightly unsettled the markets.
Gerry Sparrow
111 posts
With the election on the horizon and quarterly earnings season in full swing, it was the sixth straight week of gains.
Stocks were essentially unchanged last week as geopolitical tensions added some volatility to an otherwise quiet trading week.
When Fed Chair Powell laid out a strategy to cut short-term interest rates, but did not say “when” or “how much”, the financial markets helped him fill in the blanks to both questions.
Investors responded favorably to Fed Chair Powell's much anticipated speech about rate cuts. The remaining question being how significant a rate cut might be.
Last week’s market rally saw assists from two places: economic data and constructive Fed comments. Three critical economic data points gave investors what they were looking for: wholesale inflation, consumer prices, and retail sales.
Monday was the worst day for the S&P 500 and the Dow in nearly two years. But initial jobless claims fell less than expected—a positive sign for the labor markets— which quieted some of the recession talk. Also, as the week progressed, there was growing speculation that the July jobs report was more of an outlier than a lead indicator of a pending recession.
Two influential tech companies reported disappointing Q2 numbers, which soured sentiment. At the same time, the S&P and Nasdaq have been under pressure, with both posting losses for the second consecutive week
Fed Chair Powell indicated the Fed may not wait for inflation to reach its 2 percent target before considering a rate move, buoying the markets
The Producer Price Index, which measures the change in wholesale prices, rose 2.6 percent in June year over year—its largest increase in 16 months. By contrast, the Consumer Price Index, which tracks consumer prices, showed that the pace of inflation slowed in June. Markets shrugged off the conflicting data, instead embracing the cooler CPI data.