After a brief summer slump and a "short-lived overreaction,":https://www.horizoninvestments.com/investors-get-spooked/ stocks enjoyed their best week since November, up 4% last week.
Best week of 2024 for the S&P 500
Market sell-offs preceded both of these big moves. Back in November 2023, bad news, such as weaker-than-expected job growth, got investors excited about the possibility of a Fed rate cut and boosted stock prices. Last week, in contrast, good economic news helped stocks rally:
Consumer inflation (CPI) was lower than expected and fell below 3% for the first time since March 2021. Additionally, wholesale inflation (PPI), the average price changes seen by producers and manufacturers, came in lower than anticipated.
Initial jobless claims fell by 7,000 during the week ending August 10th, the lowest level since early July and far better than the expected increase of 3,000.
Retail sales rose more than expected, tamping down fears from earlier this month that consumer spending is running out of steam.
The upshot: With inflation firmly headed toward the Fed’s goal of 2%, many investors anticipate an economic soft landing and expect the Fed to cut rates at its September meeting. The Fed’s main focus going forward is the labor market. All eyes will be on Jackson Hole, Wyoming, this week, where Fed Chair Powell will provide his latest thoughts on the economy and the future of interest rates.
By Mike Dickson, Ph.D.
Originally published August 22, 2024
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