U.S. stocks were broadly stable on Monday after posting their best week in a year, as investors began the countdown to Fed Chairman Jerome Powell’s speech in Jackson Hole that could reset expectations for a rate cut.
The S&P 500 (^GSPC) rose 0.2%, hovering near a record high, while the Dow Jones Industrial Average (^DJI) gained nearly 0.4%. The tech-heavy Nasdaq Composite (^IXIC) gained 0.1%.
Stocks are likely to consolidate last week’s strong gains as some calm returns to a market previously buffeted by concerns about a potential recession. Last week’s rally erased losses accumulated in a sell-off in early August when Wall Street worried about cracks in the economy – concerns that have since been tempered by encouraging data on inflation and consumer spending.
The focus is already on Powell’s speech at the Federal Reserve’s Jackson Hole symposium on Friday in a week that has been relatively quiet for economic data. While confidence in a “soft landing” for the economy is growing – Goldman Sachs now sees a lower probability of a recession – the question for investors is not whether the Fed will cut interest rates in September, but by how much.
According to the CME FedWatch tool, traders on Monday morning estimated that the Fed would cut rates by 72 percent at this meeting and 28 percent that it would cut rates by 0.50 percent. But the release of the minutes of the Fed’s July meeting on Wednesday could affect those bets.
Meanwhile, investors will also be closely watching the Democratic National Convention, which begins on Monday and could potentially provide new insights into what to expect from presidential candidate Kamala Harris.
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