Stocks rocked back and forth on Friday after Powell finished his long awaited speech at the Economic Symposium. He started out his speech by stating that the “time has come” for policy change. He celebrated the progress that the central bank has made over the past three years, announcing the defeat on inflation.
Powell’s tone seemed upbeat, more positive than meeting in recent history. His comments, combined with The FOMC Minutes released earlier last week, were reassuring that an interest rate cut is coming in September. Small caps reacted positively to the update, with the Russell 2000 (IWM) soaring 3% to end the day.
Large tech stocks didn’t see as much of a reaction however, likely because markets are anxiously awaiting Nvidia’s earnings this week. Excitement around artificial intelligence has been the foundation of this bull market cycle, and Nvidia’s the golden child of the space. The company has not disappointed when it comes to earnings, consistently leaping in growth from quarter to quarter, but the big question is if they’re able to do it again. Their report, which will be released on August 28th, will determine how markets wrap up August, and likely influence September’s performance.
Apart from Nvidia’s earnings, markets will have a plethora of economic reports to navigate through. The Consumer Confidence and Consumer Sentiment reports are set to be released this week along with the GDP report, both of which will be watched closely for signs of a weakening economy. The recession argument that surfaced earlier this month is still a threat, so this week’s GDP report will either reinforce that argument, or alleviate it.
Also on the agenda this week is the PCE index, which is The Federal Reserve’s preferred inflation gauge. After Powell’s declaration of success over taming inflation last week, markets can’t afford any surprises on this report. The number is set to come in at 2.5%, remaining the same as the last reading.