A rally that had put stocks on track for their best week in 2024 lost momentum on Friday as traders evaluated the latest economic data for clues about the outlook for Federal Reserve policy.

After a six-day rally, the S&P 500 has been wavering as it “consolidates” those gains. Just a week before Jerome Powell’s speech in Jackson Hole, Wyoming, Wall Street paused to evaluate a series of data points that collectively suggested the Fed will be in no rush to take aggressive easing measures because the economy is not tanking. That view has led traders to scale back their bets on jumbo rate cuts this week as the market still braces for a first cut in September.

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Still, Friday brought more mixed economic data. US consumer sentiment rose for the first time in five months in early August on more optimistic expectations about their finances as inflation stabilized. However, the rise in sentiment was partly politically driven after President Joe Biden decided not to seek re-election. New home construction fell to its lowest level since the pandemic.

“Investors should expect more volatility in the near future as economic data is likely to send conflicting signals,” said Jeff Roach of LPL Financial.

For Florian Ielpo of Lombard Odier Investment Managers, the economic data is still fraught with “contradictions”, which is why one should still warn against excessive optimism.

“A new wave of US data has convinced markets that a recession is not imminent,” Ielpo said. “Although the market was quick to anticipate a recession, it may have been too hasty to dismiss this risk: doubts remain, more so than market valuations suggest.”

The S&P 500 fluctuated. There were small price movements in government bonds. Gold climbed to $2,500 for the first time.

Fed Chairman Powell will speak at the Kansas City Fed’s Jackson Hole Economic Policy Symposium next Friday.

With the central bank on the verge of cutting interest rates from more than two-decade-high levels, Powell’s comments will be closely watched for clues about how the Fed chief views the economy following a weaker-than-expected jobs report and a further slowdown in inflation.

The Fed is widely expected to cut borrowing costs at its next meeting on September 17-18, but there is disagreement about the exact extent of this cut.

“The main message in Fed Chair Jerome Powell’s speech will likely be that overall monetary policy has worked as designed and the current level of interest rates is restrictive,” said Anna Wong of Bloomberg Economics. “He may say that the risk ratio between the Fed’s mandates – employment and inflation – is roughly balanced. We expect him to announce a rate cut, but not to specify whether it will be 25 or 50 basis points. That will depend on the August employment report.”

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Ralf Preusser of Bank of America Corp. says the next few weeks will likely determine whether the Fed will cut interest rates by 50 to 75 basis points this year or whether it will be even more drastic.

“We remain optimistic on US interest rates and would view a Jackson Hole-triggered sell-off as a buying opportunity,” he noted.

The president of the Fed Bank of Chicago, Austan Goolsbee, said the labor market and some leading economic indicators were sending out warning signals. There were also fears that unemployment would continue to rise.

Some of the key market movements:

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