The Week That Was, The Week Ahead: Macro & Markets, August 25, 2024

Everything to Know about Macro and Markets

Stocks fluctuated between daily gains and losses throughout the week as investors awaited the latest perspectives from the Federal Reserve. Stocks jumped up after the policy path was announced. The Dow Jones Industrial Average (DJIA) rose 1.27% on the week, now standing less than 0.1% from its record close. The S&P 500 (SPX) added 1.45%, reaching 0.6% below its all-time high. The tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) closed the week with gains of 1.40% and 1.09%, respectively.

Data-Dependent Week

Wednesday’s release of minutes from the Fed’s July policy meeting injected optimism into the markets, as it revealed that Fed officials were overwhelmingly in favor of cutting rates. Rate-cut expectations were validated by the payroll revisions announced by the Bureau of Labor Statistics, as job growth in the year through March came in almost 30% lower than previously reported.

Wall Street ended lower on Thursday following some less-dovish commentary from a few Fed officials, but Jerome Powell’s speech at the Jackson Hole economic symposium on Friday helped dispel rate-cut fears. The Fed chief strongly embraced monetary easing; a step investors have hoped for since the start of the year. After the Powell voiced the central bank’s intention to begin reducing interest rates next month, stocks rallied across the board, ending the day and the week with significant gains.     

There Will Be Cuts

In his Friday speech at Jackson Hole, Fed Chair Jerome Powell affirmed expectations for an impending monetary policy pivot. Powell said that “the time has come for policy to adjust,” adding that “the timing and pace of rate cuts will depend on incoming data.”

The speech did not provide details regarding the extent and pace of the coming monetary easing. However, analysts interpreted the familiar “data-dependency” tune as the policymakers’ intention to focus on developments in the labor market.

As inflation has trended lower towards the Fed’s target range, the job market was simultaneously weakening in recent months. This lead to rising concern among market participants that the central bank may have overdone the tightening measures. Powell acknowledged these worries, saying that the Fed sees further weakening of labor-market conditions as “unwelcome.”

Most analysts and investors anticipate a 0.25% rate cut at the Fed’s next meeting in September. However, some have opined that if the payroll report – due next Friday – comes in weaker than expected, it could prompt the Fed to reduce rates by as much as 50 basis points. 

Stocks That Made the News

¤ On Friday, tech stocks sharply reversed their previous day’s slump, led by a surge in shares of Nvidia (NVDA) ahead of its highly anticipated earnings release this week. The iShares Semiconductor ETF (SOXX), which counts the AI leader along with Broadcom (AVGO), Advanced Micro Devices (AMD), and Applied Materials (AMAT) as its largest holdings, recovered from its Thursday loss, ending the week with a gain of 1.33%. The only large-cap chip stock to end the week in the red was Micron (MU), which fell after Susquehanna analysts trimmed its price target.

¤ Intuit (INTU) was the S&P 500 tech sector’s worst performer, sliding over 4% on the week after the tax and accounting software provider released an underwhelming quarterly result and lowered its long-term guidance.

¤ Builders FirstSource (BLDR) notched the top performance in the S&P 500, rallying by more than 12%. The impending monetary easing is expected to benefit  construction activity, and BLDR is one of the best-positioned among construction materials suppliers to capitalize on the forecasted upsurge, according to analysts.   

¤ Workday (WDAY) was the best performer on the NASDAQ with a surge of over 13% for the week. The human resources and capital management software provider reported strong quarterly results, with the bottom and the top lines surpassing analysts’ estimates.

Upcoming Earnings and Dividend Announcements

The Q2 2024 earnings season is drawing to a close, but several newsworthy earnings releases are still scheduled for this week.

The main earnings event of the week – and of the season – is Wednesday’s release of NVIDIA’s (NVDA) earnings. The AI darling’s shares have soared over 80% year-to-date, and analysts across the board overwhelmingly expect another beat-and-rise showing.    

Other notable companies reporting earnings this week include Salesforce (CRM), CrowdStrike Holdings (CRWD), Marvell (MRVL), Dell Technologies (DELL), Autodesk (ADSK), Lululemon Athletica (LULU), Dollar General (DG), and Ulta Beauty (ULTA).

Ex-dividend dates are coming this week for 3M (MMM), LyondellBasell (LYB), Johnson & Johnson (JNJ), KeyCorp (KEY), Home Depot (HD), NextEra Energy (NEE), Goldman Sachs Group (GS), Kraft Heinz (KHC), Dominion Energy (D), Corning (GLW), Juniper Networks (JNPR), and other dividend-paying firms.  

For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.