The US stock market continued its upward trajectory on Monday, with both the S&P 500 and the Nasdaq 100 extending their winning streaks to eight consecutive trading days. This bullish sentiment is driven by a confluence of positive factors, including a brighter outlook for the US economy and increasing expectations of a rate cut cycle by the Federal Reserve.
The S&P 500, currently within just 1% of its all-time high reached in mid-July, is on its longest winning streak since May 2024. This upward trend is supported by robust second-quarter earnings reports, with 79% of S&P 500 companies exceeding earnings-per-share (EPS) expectations and 60% reporting higher-than-expected revenue. FactSet data reveals that the S&P 500’s blended year-over-year earnings growth rate currently stands at 10.9%, marking the strongest growth since the fourth quarter of 2021.
While the tech-heavy Nasdaq 100 closed 1.3% higher on Monday, it remains 4.6 percentage points below its all-time high. Nevertheless, investors are taking heart from the recent easing of recession fears and the improved global financial market conditions.
Minneapolis Federal Reserve President Neel Kashkari, known for his hawkish stance, hinted at the possibility of a rate cut in September during an interview with The Wall Street Journal. This statement further fueled investor optimism, with market-implied probabilities currently indicating a 77.5% chance of a 25-basis-point rate cut in September and a 22.5% likelihood of a larger 50-basis-point cut, according to the CME Group FedWatch tool.
This week, traders will be closely monitoring the Jackson Hole Symposium, scheduled for August 22-24, where Fed Chair Jerome Powell is set to deliver a speech on Friday. This event will be crucial for gauging the Fed’s future monetary policy direction and assessing the potential impact of any rate cuts on the economy.
Despite the current market optimism, some analysts, like veteran Wall Street investor Ed Yardeni, are raising concerns about the potential consequences of excessive rate cuts. Yardeni cautions that aggressive easing by the Fed could lead to a strengthening of the yen and trigger a second wave of unwinding carry trades.
Notable performers on Monday included EQT Corporation, Advanced Micro Devices, Darden Restaurants, Albemarle Corporation, and NVIDIA Corporation in the S&P 500. In the Nasdaq 100, the top performers were Advanced Micro Devices, NVIDIA Corporation, Illumina, DexCom, and Moderna.
