Stocks had their best week of 2024 as fresh economic data helped ease recession fears. The S&P 500 (^GSPC) surged nearly 4%, the Nasdaq Composite (^IXIC) jumped over 5.2%, and the Dow Jones Industrial Average (^DJI) rose almost 3%. This positive momentum was driven by a series of economic data releases that reassured investors and shifted the focus to the Federal Reserve.
Looking ahead, all eyes are on Federal Reserve Chair Jerome Powell, who is expected to speak at the Jackson Hole Symposium. Investors will be listening closely for any hints on the Fed’s plans to cut interest rates in 2024. The market is currently pricing in a 76% chance of a 25 basis point rate cut by the end of the September meeting.
On the corporate side, retail earnings reports will be in focus in the coming week, with announcements expected from companies like Lowe’s, Target, Macy’s, TJX, and BJ’s. These reports will provide further insight into the health of the consumer sector and the overall economy.
The recent data releases have shown that inflation is falling towards the Fed’s 2% target, consumer spending remains strong, and layoffs are not increasing. This has led economists and Wall Street strategists to believe that a soft landing for the US economy is within reach. Bank of America Securities‘ head of economics, Michael Gapen, noted that the recent data is consistent with their forecast of a soft landing.
Despite the recent market volatility, sentiment levels have leveled out, with the S&P 500 near record highs. Technology stocks have led the market higher, and the overall outlook for the US economy remains positive. Citi’s equity strategy team believes that stocks have room to run higher this year, with a year-end target of 5,800 for the S&P 500.
In the week ahead, investors will be monitoring key economic data releases, including the Leading Index, Philadelphia Fed Non-Manufacturing Activity, MBA mortgage applications, jobless claims, manufacturing PMI, services PMI, existing home sales, and new home sales. Earnings reports from companies like Estee Lauder, Palo Alto Network, XPeng, Toll Brothers, Snowflake, Synopsys, Urban Outfitters, Zoom, Advance AutoParts, Peloton, Ross Stores, Workday, and more will also be closely watched.
Overall, the stock market is poised for further gains as economic data continues to support a positive outlook. With the Fed expected to cut interest rates and corporate earnings reports on the horizon, investors will be closely monitoring developments in the coming week.