S&P 500 gains 1.4% in weekly rise, with fuel from the Fed greenlighting rate cuts
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The S&P 500 (SP500) on Friday rose 1.44% for the week to end at 5,634.61 points, posting gains in three out of five sessions. Its accompanying SPDR S&P 500 ETF Trust (NYSEARCA:SPY) picked up 1.41% for the week.
Wall Street’s benchmark index (SP500) marked a second consecutive weekly win, following last week’s 3.93% advance that was its best since late October last year.
The bulk of this week’s gain for the S&P 500 (SP500) came on Friday, with a 1.15% increase after Federal Reserve Chairman Jerome Powell said the “time has come for policy to adjust,” and that interest rate cuts are coming. It’s now less likely that the softening labor market will provide upside pressure on inflation, he said.
“Although Jerome Powell’s comments have brought a lot of excitement for traders, it shows how deprived the market has been due to high interest rates,” Naeem Aslam, chief investment officer at Zaye Capital Markets, said in a Friday note. “We think what he said today only matters to some extent, as it is the U.S. nonfarm payrolls data that is really going to drive the narrative among traders,” he said. Traders on Friday were pricing in 100bp of rate cuts in 2024.
Goldman Sachs said it still foresees the Fed delivering an initial string of three rate cuts sized at 25bp at its September, November, and December meetings. The August employment report should be “stronger” than the July report, but “a 50bp cut would be likely if the employment report is instead soft again,” Goldman Sachs Economist Jan Hatzius said Friday.
The July jobs report set off recession fears, a key driver in the S&P 500 (SP500) sliding more than 8% from its 5,667 all-time high on a closing-quote basis. But the benchmark has since bounced back to sit just 0.6% from its peak set in July, as of Friday’s close.
In the S&P 500 (SP500), the Real Estate sector led gainers Friday by popping up +2%. Optimism in that pocket of the market has been improving, with mortgage rates declining in anticipation of the Fed starting its rate-cutting cycle.
The Consumer Staples sector was also a winner this week, with a 10% jump in Target (TGT) shares after the retailer raised its FY24 earnings outlook and logged the first positive same-store sales in more than a year.
Next week, chipmaker Nvidia (NVDA) will be the earnings headliner, with the world’s second-most valuable company providing a snapshot of demand for AI products and services.
Looking deeper into the weekly performance of the S&P 500 (SP500) sectors, ten of 11 ended higher. The Real Estate sector gained the most, up +3% after it was one of the biggest losers last week. Materials came in second, rising +2%. Energy was the sole decliner. See below a breakdown of the performance of the sectors as well as their accompanying SPDR Select Sector ETFs from August 16 close to August 23 close:
#1: Real Estate +3.63%, and the Real Estate Select Sector SPDR Fund ETF (XLRE) +3.61%.
#2: Materials +2.31%, and the Materials Select Sector SPDR Fund ETF (XLB) +2.38%.
#3: Consumer Discretionary +2.09%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) +2.59%.
#4: Industrials +1.78%, and the Industrial Select Sector SPDR Fund ETF (XLI) +1.82%.
#5: Health Care +1.73%, and the Health Care Select Sector SPDR Fund ETF (XLV) +1.69%.
#6: Consumer Staples +1.60%, and the Consumer Staples Select Sector SPDR Fund ETF (XLP) +1.65%.
#7: Financials +1.53%, and the Financial Select Sector SPDR Fund ETF (XLF) +1.51%.
#8: Utilities +1.21%, and the Utilities Select Sector SPDR Fund ETF (XLU) +1.32%.
#9: Communication Services +1.21%, and the Communication Services Select Sector SPDR Fund (XLC) +1.44%.
#10: Information Technology +1.07%, and the Technology Select Sector SPDR Fund ETF (XLK) +1.16%.
#11: Energy -0.49%, and the Energy Select Sector SPDR Fund ETF (XLE) -0.08%.
For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.