Economic data in recent weeks has remained resilient, despite experts saying that interest rate hikes and balance sheet reductions from the Federal Reserve will lead to job cuts and lower productivity. The S&P 500 Index has bounced 15% from its June lows, and key technical indicators have boosted market participants’ confidence in recent weeks that a sustained rally could be on the cards.
Over the past week, 90% of the S&P 500 stocks trading above their 50-day moving averages. Furthermore, market ‘breadth’ has also improved, with the number of stocks hitting new 52- week highs exceeding the number of new lows on a weekly basis for the first time in the year. The week ahead is packed with key events and data, including the annual economic policy symposium, PCE data, and second-quarter earnings reports that will determine where markets are headed next.
Annual Economic Policy Symposium
The Federal Reserve is holding its Annual Economic Policy Symposium in Jackson Hole on Thursday. The event will bring top central bankers, economists, and other market participants from around the world to discuss issues potentially impacting the economy and affecting monetary policy.This year’s speech, titled ‘Reassessing Constraints on the Economy and Policy,’ will focus on factors including the four-decade high inflation, the recent rate hikes, and recession risks in the future. Fed chair Jerome Powell is set to speak on Friday, with market participants paying close attention to asses the direction of the interest rate hikes soon. Traders are pricing a 54.5% chance of a 50 bps hike and a 45.5% chance of 0.75% raise in the next meeting.
Personal Consumption Expenditure
The Bureau of Economic Analysis is set to release the Personal Consumption Expenditure (PCE) Price Index for the month of July on Friday. The PCE price index, which measures the changes in the price of goods and services for household consumption, is the Federal Reserve’s preferred method to gauge inflation.
June’s PCE report showed that prices climbed 1% month-over-month and 6.8% annually, which is the highest in over four decades. However, with energy prices cooling recently, PCE growth is expected to moderate somewhat in July, which will prove to be a boost for markets.
Earnings Season Continues
Companies will continue to report on their second quarter results in the week ahead. Key earnings releases from Software as Service firms like Salesforce and Intuit will help gauge enterprise spending, while reports from Nvidia and Advance Auto Parts will give markets clarity over supply chain issues. Finally, reports from Dollar Tree and Dollar General will show how inflation is impacting the average consumer.
S&P 500 Chart
As economic data continues to remain strong, stocks have remained resilient despite a hawkish federal reserve. The week ahead is filled with inflation data and a key meeting between the members of the Federal Reserve, which will likely guide where markets are headed next in the short term.