Things could get a lot more violent. Wall Street ended one of its most tumultuous trading months of the year after the S&P 500 — which began August with its worst day since 2022 — recovered all of its losses in just three short weeks to return to record highs of all times. The broader index topped 5,660 in July. he was last but a breath away from that milestone. But next month’s setup gets harder. September is seasonally the weakest month on the calendar, with an average decline of 1.2 percent historically, Bank of America Securities technical strategist Stephen Suttmeier noted this week. Additionally, investors should focus on the Federal Reserve’s upcoming two-day policy meeting on September 17-18. The Fed is widely expected to cut interest rates. The question is how much. .SPX YTD mountain S & P 500 “There will be a lot of risk in the coming weeks,” said Jay Woods, chief global strategist at Freedom Capital Markets. “And now that we’re in earnings season, those titles will be under the microscope more than ever.” Until then, investors will have to wade through a stacked economic calendar – with the US jobs report due next week and inflation data the following – to get more clues about what to expect from the Fed in the future. The key to interest rates The path of monetary policy easing will be very much on investors’ minds throughout September, adding importance to economic reports between now and the Fed meeting. It is worth noting that August non-farm payrolls data is released on September 6, while consumer and producer price indices are due out on September 11-12. Any sign from the labor market or inflation data that suggests investors should revise their expectations for a rate cut for the rest of the year has the potential to hurt stocks. Fed funds futures pricing currently sees the key overnight lending rate cut by 1 percentage point in 2024, according to CME Group’s FedWatch tool. It’s an expectation that some observers say is too far-fetched in the face of some recent data showing that the U.S. economy continues to remain robust. The Atlanta Fed’s GDPNow model estimates real GDP growth of 2.5% in the third quarter of 2024, revised higher from 2% on August 26. said CFRA’s Sam Stovall. “The Fed has said we don’t want to fan the flames of inflation, we want to make sure the fire is out before we leave the campsite. So I think the Fed will cut rates in September, and then we’ll watch the data to “Maybe we’ll take November off the table if the data continues to come in stronger than expected,” Stovall added. “It’s still a fluid situation because the Fed remains dependent on the data.” next week’s August jobs report is expected to move the market after disappointing July payrolls fueled fears of a slowdown in economic growth, contributing to the sell-off on Aug. 5. Wall Street expects a stronger report this time around. Economists forecast the U.S. economy to have added more than 160,000 jobs in August, up from 114,000 in July, according to FactSet. The unemployment rate is expected to fall again to 4.2%, from 4.3%, consensus estimates show. August’s consumer price index is set to show annual inflation easing to 2.6 percent from 2.9 percent year-on-year, FactSet data showed. The producer price index for the same month is expected to show a decline in inflation to 1.7% from 2.2%. Extending the performance Bulls expect there is still upside for the S&P 500 this year, as long as it can outperform the next two months with the Fed meeting and the November election. This week, Bank of America’s Suttmeier, who is watching key technical levels now that the S&P 500 is reaching its previous peak again, said there is a path to 6,000 for the S&P 500 if it holds above key support at 5,560. In the short term, however, many see tech stocks rolling into this year’s market lags to continue. That trend was underscored by Nvidia this week, when a tepid reception to its earnings results failed to sway the market as much as investors had feared. Certainly, longer-term investors may want to maintain exposure to Big Tech, which could rise closer to the end of the year. “I still think there’s some upside between now and the end of the year, but I think we’ve got to get through that rough patch first,” Stovall said. Week Ahead Calendar All times ET. Monday, September 2 Markets are closed due to the Labor Day holiday. Tuesday, Sept. 3 9:45 am S & P PMI Final (August) 10am Construction costs (July) 10 am. ISM Manufacturing (August) Wednesday, September 4 10 a.m. Standing Orders Closing (July) 10am July) 10 am JOLTS Job Openings (July) 2 p.m. Fed Beige Book Earnings: Hewlett Packard Enterprise , Hormel Foods , Dollar Tree Thursday, September 5 8:15 AM ADP Employment Survey (August) 8:30 am Continuing Close 88 /24) 8:30 am Initial Claims (08/31) 8:30 AM Unit Labor Cost Final (Q2) Earnings: Broadcom Friday, September 6 8:30 AM August Task Report
