U.S. stocks moved higher today as investors anticipate key inflation and employment data to be released later this week. This uptick follows the cautious remarks made by Federal Reserve Chair Jerome Powell during his Jackson Hole speech last Friday.
The Dow increased by 156 points, or 0.5%, reaching 34,504 through noon while the
S&P went up by 12 points, or 0.3%. The Nasdaq Composite jumped 0.4% in response to slipping yields.
Both the S&P and Nasdaq Composite ended their streak of three consecutive weekly losses by rallying on Friday. Conversely, the Dow Jones saw a near 0.5% decline over the week, even though it finished Friday on a high note.
Today’s market activity appears to be a continuation of last Friday’s momentum, spurred by Powell’s remarks. Powell stated that the jury is still out on further tightening of monetary policy, emphasizing that inflation is still too high. He also indicated that policymakers are prepared to increase rates if necessary.
Kent Engelke, chief economic strategist and managing director at Capitol Securities Management, said in a phone interview with MarketWatch that Powell’s speech offered the stock market a “very short-term” green light to move higher.
Important data due this week, including the July personal consumption expenditures (PCE) price index on Thursday and August nonfarm payrolls on Friday, are being closely monitored by the Federal Reserve. Engelke noted that Fed officials appeared unconcerned about the upcoming data releases. As long as the data doesn’t significantly deviate from estimates, markets are expected to remain stable during what is likely to be a lightly traded week.
Rod von Lipsey, managing director at UBS Private Wealth Management, noted in emailed comments that Powell kept the possibility of further rate hikes “firmly on the table” during his Jackson Hole speech. He stated that this week’s core PCE figures and the next consumer price index (CPI) report in mid-September are especially crucial for understanding potential Federal Reserve actions during its meeting later in September.
The month of August is nearing its end, and the S&P 500 is down almost 4% since Friday, likely marking its first monthly loss since February. The Nasdaq Composite is down more than 5% for August, also indicating its first monthly loss since February.
In other market news, Treasury yields softened today, with the rate on the 10-year note dropping around 1 basis point to 4.22%.
Meanwhile, in China, stocks rose after the Finance Ministry and the country’s stock-market regulator introduced measures aimed at encouraging stock buying. These measures include halving the tax on stock trades and putting restrictions on sales by large shareholders in companies that haven’t distributed sufficient dividends. China’s CSI 300 index ended the day with more than a 1% gain, although it did retreat from its session highs. Shares of China Evergrande Group plunged nearly 79% in Hong Kong as they returned to trading after over a year.
Investors have a lot to consider this week, with important data releases on the horizon that could influence Federal Reserve policy and thus the broader market. Given Powell’s recent comments and the incoming economic indicators, market participants should brace for potential volatility.
