The Week That Was, The Week Ahead: Macro & Markets, September 1, 2024

Everything to Know about Macro and Markets

Stocks ended the turbulent week mixed, as the S&P 500 (SPX) eked out a 0.24% increase and the Dow Jones Industrial Average (DJIA) added 0.94%, posting a fresh record. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) fell 0.92% and 0.74%, respectively, as Friday’s surge wasn’t enough to compensate for earlier losses.  

Despite suffering whiplash at the beginning of August and registering significant swings through the month, all four major indexes managed to close the month with gains. For the DJIA and the SPX, August was the fourth consecutive month of gains. The S&P 500 added 2.28% over the month, helped by a surge in consumer staples, real estate, and healthcare stocks.  

Now, investors are bracing for September, which historically is the weakest month for stock market returns. However, the widespread hope is that the Federal Reserve’s pivot to monetary easing will support the stock-market rally going forward.

Markets will be closed on Monday, September 2^nd in observance of the Labor Day holiday.

Economy Aids the Markets

While stock news wrecked investors’ nerves, the economy provided significant positive signals. The second reading of the Q2 2024 GDP growth came in at 3% annualized, up from the initial estimate of 2.8%. August’s consumer confidence index surged to its highest level in six months, boding well for continued economic growth down the road, as household spending represents about 70% of GDP.

While these reports encouraged market participants, the strongest positive impulse came from the latest Core Personal Consumption Expenditures numbers. In July, the Fed’s preferred inflation measure remained unchanged from June’s annual pace of 2.6%, slightly below expectations. Meanwhile, personal income and personal spending rose from the previous month, surpassing expectations.

Taken together, these reports painted a near-perfect picture of a still-robust economy, resilient consumer spending, and gradually cooling inflation – which gives the Fed plenty of room to gradually ease its monetary policy.

“Goldilocks” Theory Put to the Test

This picture will be tested this coming Friday with the release of the labor-market data, including the change in payroll numbers and the unemployment rate. Economists anticipate the unemployment rate to ease from July, when it unexpectedly jumped to 4.3%, its highest since October 2021. Further upping the ante for the next job-data releases, the BLS downwardly revised the payroll data for the year through March 2024, cutting the number of jobs gained by 0.5%.     

Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole on August 23^rd included an unmistakable signal the central bank would begin cutting interest rates at its next meeting on September 17^th. While Powell implied that policymakers are gaining confidence that the inflation is lowering, he also indicated that they do not wish to harm the job market by not acting to ease their policy. Basically, Powell signaled the Fed’s concern that keeping interest rates elevated could spark a downward spiral, where weak job growth hurts consumer spending, which in turn hits employment, and so on, causing a recession.

Powell didn’t provide much detail about the scope and pace of the Fed’s impending actions in his speech. Currently, the markets are pricing in a 0.25% cut in September and a full 1% reduction by the end of the year. However, according to analysts, job market data will be key to the size of September’s rate cut, i.e., if it comes in significantly weaker than expected, the Fed may reduce rates by as much as 0.5%. 

Stocks That Made the News

¤ Nvidia’s (NVDA) stock fell despite posting stellar fiscal Q2 2025 results, with revenues surging by 122% year-over-year and EPS jumping by 152% and announcing an additional $50 billion share repurchase authorization. The stock was “priced for perfection,” and investors were spooked by some margin narrowing due to production delays of the new Blackwell chip, questioning Nvidia’s ability to continue growing at its current breakneck speed.   

¤ Super Micro Computer (SMCI) saw its shares plummet by over 30% in August, closing its worst month ever. This came after a report from Hindenburg, a notorious short-seller, alleged “accounting manipulation” and the company postponed the release of its annual filing with the SEC as it said it needed to assess “its internal controls over financial reporting.” JPMorgan analysts said that there was scant evidence in the report of accounting offenses. However, the reporting delay, which lacked clear communication with the investors, alarmed the markets.  

¤ Dell (DELL) surged after releasing blockbuster second-quarter results, with revenue growth led by record income from its server and networking segment. The results signaled Dell’s ability to capitalize on surging corporate AI-infrastructure spending, leading to multiple analyst upgrades for the stock.   

¤ Intel (INTC) soared over the week on reports that the company is considering a possible spinoff or sale of its foundry business. The chipmaker’s disastrous earnings report and dividend suspension led to a crash in share price, which is down by more than 50% year-to-date and is near its 20-year lows.    

¤ Marvell Technology (MRVL) jumped after the company reported better-than-expected sales and profits, with the results driven by surging demand for AI-supporting networking equipment.

¤ Berkshire Hathaway ($BRK.B) was the best performer in the S&P Financials sector. Warren Buffet’s financial conglomerate became the first non-technological company ever to reach a market capitalization of $1 trillion.

¤ Ulta Beauty (ULTA), whose shares were added to the Berkshire holdings last quarter, fell after posting weaker-than-expected revenues and profit while trimming guidance below analysts’ forecasts.

¤ Dollar General (DG) crashed by over 33% on the week after the discount retailer posted weaker-than-expected revenue and profit in Q2 and lowered its full-year guidance.

Upcoming Earnings and Dividend Announcements

The Q2 2024 earnings season has largely ended, with only seven companies yet to report their results. The quarter was stronger than expected in terms of earnings growth, with technology, financial, and healthcare sectors leading the way. Corporate profits hit a record high last quarter, more than recouping Q1’s decline and reaching a total of $3,425 billion.

Although the season is winding down, several newsworthy earnings releases are still scheduled for this week. These include Dick’s Sporting Goods (DKS), Dollar Tree (DLTR), Kroger Company (KR), Zscaler (ZS), Hewlett Packard Enterprise (HPE), and DocuSign (DOCU).

However, the main earnings event of the week will be the earnings release of Broadcom (AVGO), expected on September 5^th after close. Analysts project that the chip and software giant will produce another strong quarterly result, supported by strategic partnerships and AI-related demand.

Ex-dividend dates are coming this week for McDonald’s (MCD), Lockheed Martin (LMT), Nike (NKE), Analog Devices (ADI), Northrop Grumman (NOC), PepsiCo (PEP), Bank of America (BAC), Qualcomm (QCOM), Realty Income (O), and other dividend-paying firms.   

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