The recent rise in Wall Street stocks and the second consecutive all-time high for the Dow are largely attributed to fresh U.S. economic data that has raised expectations for Federal Reserve rate cuts. The anticipation of a modest rate cut in September has been bolstered by solid growth in U.S. consumer spending for the month of July. This has given investors the sense of being in a “soft landing,” as described by Cameron Dawson, the chief investment officer at Newedge Wealth.
A “just-right” Goldilocks economy is one that experiences steady growth without fueling excessive inflation. This balance was reflected in the market’s reaction to the economic data, with companies like Amazon, Tesla, Broadcom, and Marvell seeing significant gains in their stock prices. The market’s reception to the quarterly forecast of Marvell Technology, which exceeded estimates, further solidified the positive outlook.
Federal Reserve Chair Jerome Powell’s recent expression of support for an imminent policy adjustment has also boosted investor confidence. The upcoming Labor Department’s jobs report, due on Friday, will provide further insight into the state of the U.S. economy and the potential need for rate cuts. The current odds for a 25 basis point rate cut in September are high, with diminishing expectations for a 50 basis point cut.
The month of August was marked by significant market volatility, driven by concerns over a sudden moderation in the labor market and fears of a U.S. recession. However, the market has since rebounded, with the S&P 500 trading near record highs. The influence of the Japanese yen carry trade exacerbated the market’s fluctuations, but the recovery has been swift and strong.
Several individual stocks saw notable movements in response to company-specific news. Nvidia rebounded after a drop, while Novavax surged following FDA authorization for an updated COVID shot. However, Ulta Beauty slid after trimming its annual forecasts, citing slowing demand for high-priced cosmetics. Intel and Dell Technologies both saw gains after positive reports and forecasts, while Trump Media & Technology Group experienced a record low in stock value.
Overall, the market’s response to recent economic data and individual company news has been largely positive. The anticipation of Federal Reserve rate cuts, along with steady growth in consumer spending, has fueled investor confidence and contributed to the overall rise in Wall Street stocks. Despite concerns over market volatility, the performance of key sectors and individual stocks has remained strong, pointing towards a cautiously optimistic outlook for the future.