Indexes Edge Higher – by Justin Vaughn

(Justin Vaughn, Editor, Options Trading Report)

After all the hoopla, after Mr. Powell’s giant release of the half point rate cut, markets drifted with the indexes all closing a slight bit higher for the week, but very uneventful. Still the Dow Jones Industrial Average managed a new record high, over 42000 after a spirited move on Wednesday, supported by good data on Labor and lower interest rates. By Friday it was back to a ho-hum market. All three indexes finished lower, setting the stage for the week ahead (this week) as the opening Monday was cautious. Good news for home buyers was the ‘new’ 30-year fixed rate mortgage dropping to 6.09%, from 6.20% a week earlier, according to Freddie Mac. Just a month ago rates were at 6.50%, with prospective buyers on the sidelines. At 6.09%, rates have dropped from over 7% a year ago with new home buyers now beginning to ‘hit-the-market.’ According to the NAR (National Association of Realtors), the 30-year fixed rates continue to adjust downward, more buying activity is expected to be generated for new and existing homes.

Sustaining the economy, a major concern of most investors and traders, has given the general markets the jitters, at the opening Monday. The week ahead, with the Census Bureau releasing the “Durable Goods Report” for August on Thursday and the PCE (Personal Consumption Expenditures Index) coming, Friday will outline important data on manufacturing of durable goods and the buying of foodstuffs, energy and personal needs, with data on consumer spending and measuring of inflation. Both reports favored by the Fed, will give vital inflation direction and indications on the economy’s health.

Monday’s market was cautiously positive with the Dow Jones Industrial Average climbing to another record (“it’s 30th of the year”) finishing this time at 42124. The benchmark S&P 500 was up 16 points, but still climbed to its ‘40th record close’ in 2024. The tech heavy Nasdaq Composite edged up 0.1% to 17974. Soft Landing hopes were supported by new data reinforcing a more positive and growth sustaining economy., Stocks continued on the upswing Tuesday after taking a short dip early in the session. The Conference Board’s Reading was “lower than what 104 economists surveyed by Bloomberg expected,” and suggesting that “recession prospects are not likely and to expect slower momentum in 2025.” The day picked up steam with all indexes in the positive, climbing just enough to again hit new levels. The S&P 500 crested to “the 41st new high this year,” while the Dow Jones Industrial Average was up just enough for another record close.

Wednesday’s market was lethargic, with ‘see-saw’ movements throughout the day, as worries about the economy continued. Investors and consumers are now focusing on whether or not the economy can avoid a recession. Can consumers regain a previous level of confidence … .spending, and will labor continue to ‘normalize’? Gold closed Wednesday down $3.00 an ounce, finishing at $2,681.90 after reaching $2,696, a record high early in the week. For the year the ‘shiny’ metal has gained $617.80, up a whopping 28.8%. Crude oil has bounced around the low seventies for several days falling to $67.50 at Wednesday’s close. Bond yields dropped slightly with the 10-year Treasury slipping to 3.736% from 3.740%. The Chinese yuan has strengthened as new economic measures recently instituted by President Xi Jinping have given its economy a kick-start, very badly needed.

RUMBLINGS ON THE STREET

Brad Rogoff, Barclays Global head of fixed income, currency and commodity research, WSJ – “While it remains too early to declare a soft landing, [Fed] Chair [Jerome] instilled confidence in markets by claiming that a 50 basis point cut was an appropriate recalibration of policy, rather than a sign of fundamental deterioration,” Mr. Rogoff said.

Chris Mediate, President of Mediate Financial Services, Barron’s – “When people start losing income, they start chasing risk. Let’s be careful what we’re chasing.”

Charlie Ashley, portfolio manager at Catalyst Funds, WSJ – “Employment readings will have a larger influence on market direction over the next several months as the Fed tries to navigate the economy toward a soft landing,” said Mr. Ashley.

Steven Kaplan, a conservative-leaning economist at University of Chicago’s Booth School of Business, WSJ – “When you put a tariff on something artificially, you’re going to make things more expensive, and if it’s an input, like steel for example, then you’re going to make the downstream companies that are using steel less competitive.”