Market Summary
The stock market extended gains to new record highs last week - something participants have grown accustomed to - with prevailing optimism for rate cuts and mega-cap technology leadership offsetting lingering areas of uncertainty.
The market’s heaviest weighted components continued to be crucial in supporting the broader indices, marked by a nearly 1.6% gain in the S&P 500, while the S&P 500 equal weighted index advanced just 0.3%.
Individual corporate news helped drive gains. Particularly from cloud infrastructure giant, Oracle (ORCL), which sparked moves within mega-caps and the broader technology sector with Nvidia (NVDA), Broadcom (AVGO), and Tesla (TSLA) as notable standouts.
Oracle fell short of earnings expectations but still gained nearly 25% on the week with management noting $455 billion in unbilled and deferred revenue from contracts with major AI-related companies.
Economic data in the form of tame inflation and continued signs of labor market softening helped reinforce rate cut expectations. Currently, the market is pricing in at least two rate cuts with a growing probability of three by year-end. The Fed will make its next interest rate decision on September 17.
Headline inflation for August grew to 2.9% from 2.7% on a yearly basis with core inflation (ex-food and energy) unchanged at 3.1%.
U.S. Core Inflation Rate (August 3.1%)
On the labor front, weekly initial claims increased 27,000 to 263,000 above consensus of 235,000 – the most since October 2021 – aligning with previous signs of a deteriorating labor market backdrop.
U.S. Weekly Initial Jobless Claims (Sept. 6)
Week Ahead
This week, the Federal Reserve will make its next interest rate decision on Wednesday as the market expects at least a 25bps rate cut. More importantly, participants will be keen on listening to Fed Chair Powell’s commentary as it relates to the path of future rate cuts. Economic data will be relatively light with Retail Sales for August to be released on Tuesday along with some key housing data throughout the week.
As always, if you have any questions or comments please do not hesitate to reach out.
Michael Neill, CFA
Chart Sources: TradingEconomics