Wall Street had a strong week, with the S&P 500 and Nasdaq both bouncing back from Thursday’s losses to finish the week up nearly 1.5%. This positive momentum was fueled by Federal Reserve Chairman Jerome Powell’s speech from Jackson Hole, where he indicated that interest rate cuts are on the way. Powell stated that the “time has come for policy to adjust,” leading the market to expect 100 basis points of cuts by the end of the year.
The current odds, according to the CME FedWatch tool, are for a 25-basis-point cut in September, a possible 50-basis-point cut in November, and a 25-basis-point cut in December. This news has investors feeling optimistic about the future of the market and has contributed to the recent gains.
One of the best-performing stocks of the week was TJX Companies, which added more than 6.5% after reporting a strong quarterly beat and raising guidance. Despite this positive performance, we maintained our 2 rating on the stock, indicating that we would want to see a pullback in shares before considering further buys. Similarly, Palo Alto Networks saw a 4% gain after delivering strong earnings and a promising outlook. We raised our price target to $380 from $360 but kept our 2 rating.
However, not all earnings reports were as positive. Estee Lauder disappointed, leading us to exit the stock due to a lack of progress in the prestige beauty market. This move was in line with our discipline of selling in an overbought market, as indicated by the S&P Short Range Oscillator tipping overbought.
Looking ahead, the upcoming week features some key earnings reports, including Nvidia, Salesforce, and Best Buy. Nvidia is set to report its fiscal 2025 second quarter, with investors eagerly awaiting guidance for the current quarter and commentary on supply and demand dynamics. Salesforce will also report its fiscal 2025 second quarter, with a focus on deal activity and business confidence. Best Buy will issue its earnings before Thursday’s opening bell, with attention on marketing strategies for AI-equipped hardware.
On the economic front, the week will bring the government’s second look at U.S. economic growth in the second quarter and the release of the personal consumption expenditures (PCE) price index. The PCE is expected to show a year-over-year increase of 2.5% for the headline rate and 2.7% for the core rate, excluding food and energy prices. This data will be crucial in assessing inflation trends and the overall health of the economy.
Overall, Wall Street is entering an important week with optimism and anticipation. The market’s recent gains, coupled with expectations of interest rate cuts and strong earnings reports, have investors feeling bullish. It will be interesting to see how the week unfolds and how these factors impact the market moving forward.
