The U.S. stock market seems positioned for a flat opening this morning, as traders digest last week’s massive rally. In the coming days, investors will be paying close attention to the latest economic news and corporate results. In addition, the Federal Reserve will be a major area of focus. As we were publishing this piece, the S&P 500 Index futures were up three points (0.05%) in pre-market trading.
A small batch of economic reports will be released over the next few days. Today, The Conference Board’s U.S. Leading Economic Indicators report for the month of July will be issued. Later in the week, minutes from the FOMC’s (Federal Open Market Committee) meeting, weekly jobless claims, and monthly home sales will be reported. Meanwhile, the main event is slated to take place on Friday morning, when Federal Reserve Chairman Jerome Powell delivers remarks at the annual Jackson Hole Economic Symposium. Here, Wall Street will be looking for confirmation that interest rates are set to move lower. The majority of investors are confident that a 25-basis-point rate reduction will be approved in September. Some are even thinking a larger rate cut might be announced. Such a move would make sense, in our view. Inflation finally seems to be under control. Further, the consumer seems overextended, the labor market is softening, and lower rates might keep the economy from weakening.
Meanwhile, a number of high-profile corporations will weigh in with profit reports this week. In the retail arena, we will hear from Lowe’s (LOW), Target (TGT), and TJX (TJX). In the technology sector, reports from Palo Alto Networks (PANW), Synopsys (SNPS), and Snowflake (SNOW) should warrant some attention.
The stock market staged a sizable rebound last week, recovering considerable ground. The rally has managed to put the S&P 500 Index back above its 50-day moving average (located at 5,465), which is an area of technical significance. For the most part, the recent pullback was probably a constructive development, as it managed to restore balance to the market, particularly in the technology sector, where valuations had become extreme. From here, it is not clear if the rally will continue, or if further consolidation might follow. Elsewhere, it is worth mentioning that the global political landscape, particularly in the Middle East, could prove disruptive if tensions escalate. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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