The equity market finished higher on the week as Fed Chair Jerome Powell said the time has come for monetary policy to adjust. For the week, the S&P 500 was +1.5%, the Dow was +1.3%, and the NASDAQ was +1.1%. Within the S&P 500 Index, the Real Estate, Materials, and Consumer Discretionary sectors led the market, while the Energy, Technology, and Communication Services sectors lagged. The 10-year U.S. Treasury note yield decreased to 3.804% at Friday’s close versus 3.888% the previous week.
The Fed Chairman outlined his view that monetary policy would loosen and short-term interest rates would start to decline. He stated that while inflation is still above the Fed’s policy target of 2% that it was on a sustainable path to get there. Based on CME Fed funds futures, investors currently see a 0.25% reduction to the Fed funds target rate to a 5.00% to 5.25% range at the September FOMC meeting and a total of 1.00% in cumulative reductions by year-end.
We are 96% done with second quarter earnings reports. Fifteen companies in the S&P 500 Index are scheduled to report earnings this week. For the second quarter, earnings growth is expected be 10.9% higher year-over-year with revenue growth of 5.2%. Full-year 2024 earnings for the S&P 500 Index are expected to grow by 10.1% with revenue growth of 5.1%.
In our Dissecting Headlines section, we look at a few end of Summer data points to include Labor Day travel and back-to-school shopping.
Financial Market Update
Dissecting Headlines: Farewell Summer
Labor Day weekend is on the horizon, marking the traditional end of the Summer season. Despite several years of above-average inflation and dwindling pandemic-era savings, American consumers are still hanging tough, but have grown a bit more cautious.
The National Retail Federation is forecasting back-to-school spending of $38.8 billion, the second highest on record, but down 6.5% from 2023’s record $41.5 billion in spending. Part of the lower spending is a decrease in prices for many common back-to-school purchases with several essential supplies such as paper, pencils, crayons, and sticky notes all down more than 10% year-over-year. Backpacks, however, are more expensive year-over-year. Data from other surveys indicate that over 30% of parents say that they expect to take on debt to cover their back-to-school shopping needs.
While back-to-school shopping is posing some challenges, Labor Day weekend travel is expected to increase 9% year-over-year, based on data from the American Automobile Association (AAA). Similar to back-to-school, travel prices have come down with the overall cost to travel domestically lower by 2% year-over-year. One big contributor to lover travel costs is gasoline prices. The national average price for regular unleaded is $3.351 per gallon, which is 12.3% lower than a year ago.
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The Time Has Come
The equity market finished higher on the week as Fed Chair Jerome Powell said the time has come for monetary policy to adjust. For the week, the S&P 500 was +1.5%, the Dow was +1.3%, and the NASDAQ was +1.1%. Within the S&P 500 Index, the Real Estate, Materials, and Consumer Discretionary sectors led the market, while the Energy, Technology, and Communication Services sectors lagged. The 10-year U.S. Treasury note yield decreased to 3.804% at Friday’s close versus 3.888% the previous week.
The Fed Chairman outlined his view that monetary policy would loosen and short-term interest rates would start to decline. He stated that while inflation is still above the Fed’s policy target of 2% that it was on a sustainable path to get there. Based on CME Fed funds futures, investors currently see a 0.25% reduction to the Fed funds target rate to a 5.00% to 5.25% range at the September FOMC meeting and a total of 1.00% in cumulative reductions by year-end.
We are 96% done with second quarter earnings reports. Fifteen companies in the S&P 500 Index are scheduled to report earnings this week. For the second quarter, earnings growth is expected be 10.9% higher year-over-year with revenue growth of 5.2%. Full-year 2024 earnings for the S&P 500 Index are expected to grow by 10.1% with revenue growth of 5.1%.
In our Dissecting Headlines section, we look at a few end of Summer data points to include Labor Day travel and back-to-school shopping.
Financial Market Update
Dissecting Headlines: Farewell Summer
Labor Day weekend is on the horizon, marking the traditional end of the Summer season. Despite several years of above-average inflation and dwindling pandemic-era savings, American consumers are still hanging tough, but have grown a bit more cautious.
The National Retail Federation is forecasting back-to-school spending of $38.8 billion, the second highest on record, but down 6.5% from 2023’s record $41.5 billion in spending. Part of the lower spending is a decrease in prices for many common back-to-school purchases with several essential supplies such as paper, pencils, crayons, and sticky notes all down more than 10% year-over-year. Backpacks, however, are more expensive year-over-year. Data from other surveys indicate that over 30% of parents say that they expect to take on debt to cover their back-to-school shopping needs.
While back-to-school shopping is posing some challenges, Labor Day weekend travel is expected to increase 9% year-over-year, based on data from the American Automobile Association (AAA). Similar to back-to-school, travel prices have come down with the overall cost to travel domestically lower by 2% year-over-year. One big contributor to lover travel costs is gasoline prices. The national average price for regular unleaded is $3.351 per gallon, which is 12.3% lower than a year ago.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.