Last Week
The stock market was dancing to the beat of the Four Tops’ 1965 classic hit “It’s the Same Old Song”, as once again inflation data influenced traders’ expectations for upcoming interest rate decisions. The big move on Tuesday followed the July consumer price index report, which showed a tame year-over-year increase of 2.7%. That rally continued Wednesday, but Thursday’s hot reading on the July producer price index renewed doubt about the Fed’s next move in September. The increase in the PPI was its most considerable monthly rise since 2022 as some of the tariff costs hit the economy. Small caps have become particularly volatile based on the interest rate dynamics, with the Russell 2000 surging on Tuesday and Wednesday and retreating on Thursday and Friday to finish +3.1% for the week. We think the stage is set for small caps to do the Rate Cut Strut, starting with a September cut in the Fed funds rate. The S&P 500 gained 0.9%, the Nasdaq Composite advanced 0.8%, while advancing issues doubled the number of declining issues.
The bond and currency markets were subdued, with the Dollar inching lower and the yield on the 10-year Treasury rising 4 basis points to 4.33%. Gold retreated from its record high, while Crude Oil continued to sink on the prospect of additional supply coming online. The silver lining might be that lower energy prices could cool off producer prices and offset some of the higher tariff costs.
On the Chicago Sports Scene, the Cubs returned to looking like a playoff team, taking two out of three from the Pirates at Wrigley Field. The South Side also had a fantastic weekend as the White Sox were on a road trip and the Savannah Bananas sold out Guaranteed Rate Field for the weekend. Sox fans were reminded of the good old days as Mark Buehrle and A.J. Pierzynski made guest appearances for the Bananas. The Bears looked like Super Bowl contenders in their 38-0 preseason victory over the Bills at Soldier Field.
This Week
This week, Wall Street will focus on the annual Jackson Hole Economic Policy Symposium and earnings results from some of the largest retailers. Additionally, Ukrainian President Volodymyr Zelenskyy is set to meet U.S. President Donald Trump on Monday in a follow-up to the “summit” between Trump and Putin last Friday.
With the Federal Reserve’s dual mandate of price stability and maximum employment coming under pressure after concerning jobs and inflation data this month, Jackson Hole will be keenly watched for any clues on the central bank’s future actions.
Turning to the earnings calendar, retail giants Walmart, Target, and Lowe’s will all be reporting results, which should provide investors with an important update on consumer behavior during these confusing times.
The economic calendar is light, with investors receiving the S&P flash Purchasing Managers’ Index on Thursday, perhaps in focus. In the most recent readings, both the services and manufacturing industries have been hovering between expansion and contraction.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.