The stock market is facing a potential pullback despite its recent climb, as index futures traded narrowly mixed in early Tuesday trading. While the market saw a surge in gains last week, traders are wary of a potential downturn.
The main catalyst for the day is a couple of speeches from Federal Reserve officials, with all eyes set on Chair Jerome Powell’s highly anticipated address at the Jackson Hole Symposium on Friday. Until then, the market is likely to adopt a wait-and-see approach.
Despite the potential pullback, several factors suggest continued upward momentum for some sectors. The recent bounce in cryptocurrencies could benefit stocks exposed to these digital assets. Additionally, tech stocks appear on track to maintain their upward trend.
Monday’s gains were driven by a combination of weak economic data and a Fed official’s speech that hinted at a potential rate cut. Minneapolis Fed President Neel Kashkari, considered a hawkish figure, indicated that the possibility of rate cuts in September was a valid discussion point, given the shifting balance of risks.
The tech-heavy Nasdaq Composite index and the broader S&P 500 index extended their winning streaks to eight sessions, reaching their highest closing levels since July 23 and July 16, respectively. The S&P 500 is now just under 60 points away from its all-time highs. The 30-stock Dow Jones Industrial Average also saw a five-session winning streak, driven by gains in McDonald’s Corp, Amgen, Inc, and Intel Corp.
Analysts from Goldman Sachs believe the stock market is entering a positive four-week period. They cite factors like inflows from trend-following funds, buying by volatility-control funds, and rising corporate demand as potential drivers of this positive trend. However, they also warn of a potential negative turn in the market after September 16th.
Looking ahead to the Jackson Hole Symposium, economists anticipate that Powell’s speech will signal a path toward a rate cut in September without disclosing the specific size. They believe the Fed is growing more confident in inflation moving towards its target, allowing for a loosening of monetary restrictions. However, they caution that significant economic data, including August inflation and payrolls, is still pending.
Meanwhile, several companies are set to release their quarterly results, including Palo Alto Networks, Lowe’s Companies, Medtronic, Vipshop Holdings, Toll Brothers, Coty Inc, La-Z-Boy, and ZTO Express. The rally in Bitcoin has also boosted shares of MicroStrategy Incorporated and Coinbase Global, Inc.
In the commodity markets, crude oil futures continued their downward trend, trading around the $73.5 level. Conversely, gold futures gained ground, surpassing the $2,560 mark.
Global equity markets displayed mixed performance. The Japanese Nikkei 225 average saw a sharp rise, while Hong Kong, Chinese, Malaysian, and Indonesian markets retreated. European markets showed a fluid sentiment, with the Euro STOXX Index rising slightly and the U.K.’s FTSE Index experiencing a sharp pullback.
