Stocks and Bonds Gain on Fed Rate Cut Speculation

Good morning, and welcome to the unofficial final week of the summer, as we head into Labor Day weekend.

The Dow (+1.3%), NASDAQ (+1.4%), and S&P 500 (+1.5%) each gained modestly for the week.  Meanwhile taxable bonds were up 0.7% and tax-free municipal bonds were up 0.1%.  The 10-year Treasury yield fell 0.09% to end the week at 3.80%.

There wasn’t a whole lot of economic data reported last week, and that was amid low trading volume that is typical in the last couple weeks of the summer.  Leading Economic Indicators (LEIs) released by the Conference Board were down again for July, marking over two years of consecutive monthly declines.  However, the Conference Board stated that the past six month were down less, and that the six-month growth rate “no longer signals recession ahead”.  Then later in the week, the Bureau of Labor and Statistics (BLS) reported a revision to job gains in the year ending March 2024.  That report indicated that the economy gained 818,000 less jobs (over 30%) than previously reported, and sparked the attention of most economists.

As noted in prior recaps, the Fed has two mandates – price and job stability.  Late last week, Fed Chairman Powell stated that the Fed is likely to cut rates in September in an attempt to keep the slowdown of the jobs market from going too far.  Of course, that assumes that inflation remains in check.  In the upcoming final week of the summer, all eyes will be on Nvidia’s earning report that will be released on Wednesday.  It is widely expected that the markets will be heavily influenced by their earnings report, so strap on your boots!

Have a great day, terrific week, and a safe and wonderful holiday weekend.

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