U.S. stocks were broadly stable on Monday after posting their strongest week in a year as investors began awaiting a speech from Federal Reserve Chairman Powell in Jackson Hole that could reset interest rate cut expectations.
The S&P 500 (^GSPC) rose 0.2%, the Dow Jones Industrial Average (^DJI) added almost 0.4%, and the tech-heavy Nasdaq Composite Index (^IXIC) added 0.1%.
Stocks are set to consolidate last week’s big gains, a sign of calm returning to a market that has been rattled by fears of a potential recession. Last week’s gains recouped losses accumulated during an early August sell-off as Wall Street worried about cracks in the economy. Those fears have since eased thanks to strong data on inflation and consumer spending.
After a data-free week, attention now turns to Chairman Powell’s speech on Friday at the central bank’s Jackson Hole Symposium. With growing confidence in a “soft landing” for the economy (Goldman Sachs sees a recession as less likely), the question for investors is not whether the Fed will cut interest rates in September, but by how much.
As of Monday morning, traders were pricing in a 72% chance of the Fed cutting interest rates by 0.25% at the meeting and a 28% chance of a 0.50% cut, according to the CME FedWatch tool. But those views could change when the minutes from the Fed’s July meeting are released on Wednesday.
Meanwhile, investors will also be keeping their eyes on the Democratic National Convention, which kicks off on Monday and could provide further insight into what to expect from presidential candidate Kamala Harris.
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