US stocks ended a volatile August on a high note as the Federal Reserve’s preferred inflation measure supported expectations of future interest rate cuts this year and policy easing in September.
S&P 500 – What a great August to end up
During the month, the Dow Jones Industrial Average ( DJI) rose by about 0. 6 percent higher than it was on Thursday, moving up from the record closing it recorded that same day. In the same sentiment, the S&P 500 index (GSPC) gained 1% while the Nasdaq Composite index (IXIC) rose by 1%.
By the last trading day of the month in August, all three key stock indexes were in the green for the month managing to recover from early losses.
Recession Worries Disappear as Optimism Arises
In this regard, investor sentiment remained mostly positive because concerns about the recession and the market slump that occurred in early August are no longer at the forefront. Markets get another fillip by a seemingly imminent Federal Reserve easing on the cards.
The most recent money supply stats and the most recent readings of the Personal Consumption Expenditures (PCE) rising as expected in July was good news for Wall Street. The measures of core inflation excluding the prices of food and energy rose by 0. 2% compared with the previous month according to previously projected figures. Core inflation continued to slow to 2 percent on an annual basis in line with the ministry of finance’s target of core inflation. 6% which is just a shade short of the projected to 7%.
PCE Inflation: Needless to say, the Key Metric of the Fed is The Federal Funds Rate
Another important measure of inflation is the PCE inflation index which is closely followed by the Federal Reserve and therefore is important for any investor. Such numbers assist in setting the benchmark for the depth and the frequency of interest rate decline during the year. After Federal Reserve Chair Jerome Powell suggested last week that a policy shift may occur as soon as September, talk of a is mostly focused on a 0. this idea of a 5% rate cut started receiving positive comments. But, the inflation rates have maintained a steady performance in July that resulted in a more moderate 0. 25% cut in consideration.
Market Reactions and Future Vision
Even though investors have turned their attention away from Nvidia’s (NVDA) earnings that took centre stage earlier in the week, the Nasdaq Composite still closed the week slightly lower. The fact that technology has a large component of cyclicals was evident in the performance of the average as it was pulled lower by the choppy performance post earnings released by the technology heavyweights as well as the fact that the market did recover at the later end of the week.
All that remains in the year is Fed decision-making, and the world will be watching intently as the Federal Reserve determines most of the remainder of the year’s results. People are positive that low inflation rates coupled with a healthy economy will result to a positive market in the coming months.
