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Aside from flows and positioning, the recent rally has been also fueled by bets the Federal Reserve will signal it’s getting closer to cutting rates. Just days ahead of Jerome Powell’s speech in Jackson Hole, key US payrolls revisions is poised to capture Wall Street’s attention.
The S&P 500 hovered near 5,600. Palo Alto Networks Inc. climbed on a bullish outlook and after boosting its buyback program. Lowe’s Cos. lowered its full-year guidance as the frozen housing market keeps consumers on the sidelines for big purchases.
Treasury 10-year yields declined three basis points to 3.84%. The loonie trailed most of its major peers as inflation in Canada decelerated, cementing rate-cut wagers. Oil steadied, with traders monitoring developments in cease-fire talks for the war in Gaza.
Goldman Sachs Group Inc. and Wells Fargo & Co. economists expect the government’s preliminary benchmark revisions on Wednesday to show payrolls growth in the year through March was at least 600,000 weaker than currently estimated. While JPMorgan Chase & Co. forecasters see a decline of about 360,000, Goldman Sachs indicates it could be as large as a million.
“Markets, having recently experienced a growth scare that led to concerns that the Fed is behind the curve, will be monitoring Wednesday’s release of the benchmark revision to see if the market’s initial reaction was, in fact, correct,” said Quincy Krosby at LPL Financial
“What may matter more than whether the Fed cuts 25 basis points or 50 basis points in September is the longer-term trajectory of rates,” said Jason Pride and Michael Reynolds at Glenmede. “Given the fact that inflation looks to still be on its disinflationary course, investors should be listening for signs that the recent rise in the unemployment rate is changing their calculus.”
To Anthony Saglimbene at Ameriprise, continued progress on inflation, moderating but still healthy labor conditions, and economic updates that point to firm consumer trends likely allow the Fed to comfortably begin cutting its policy rate in September.
From a monetary policy perspective, whether it’s a 25 or 50-basis point cut next month isn’t really that important, he noted. What is important — and not lost on investors over the last week or so — is that updates on labor, services activity, inflation, and the consumer all point to a still healthy economic environment, but one that allows the Fed room to start easing monetary policy.
“This is how a soft landing starts, in our view. Of course, there is no guarantee the Fed will ultimately pull it off, but you need the conditions in place to start, and it looks like we finally have those conditions in place today, he said.
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S&P 500 Churns After Historic Rally Toward Record: Markets Wrap
Stocks struggled to make headway after a rally that drove the market closer to all-time highs, wiping out its early August losses.
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