Wall Street: US markets rally as focus shifts to Jackson Hole

Market rally supported by positive economic data

US equity markets extended their gains on Friday, wrapping up a week marked by economic data that helped calm the market jitters seen earlier in August. Traders welcomed softer inflation figures, solid retail sales, a dip in unemployment claims, and a stronger-than-expected Michigan consumer confidence print, which collectively eased recession fears. For the week, the Nasdaq rose by an impressive 5.3%, the S&P 500 gained nearly 4%, and the Dow Jones added a robust 1,162 points (2.9%), quick to embrace the narrative of growth without inflation.

This week's spotlight is firmly on the Jackson Hole Symposium, which has the theme "Reassessing the Effectiveness and Transmission of Monetary Policy." Federal Reserve (Fed) Chair Jerome Powell is scheduled to deliver his much-anticipated address on Saturday, 24 August at 12.00am AEST.

Jackson Hole Symposium

Date: 22 – 24 August 2024

The Jackson Hole Economic Symposium is an annual conference hosted by the Kansas City Fed in Jackson Hole, Wyoming. The event gathers central bankers, finance ministers, academics, and financial market participants from around the globe to discuss important issues facing the global economy.

While it is historically more revered for its academic discussions than as a spotlight for immediate monetary policy direction from Federal Open Market Committee (FOMC) leaders, it has, in recent years, served as a stage for some meaningful announcements.

Powell's evolving tone: from decisive shifts to cautious optimism

In 2022, Chair Powell used the platform to push back against expectations for easing, representing a turning point for policy expectations, with long-term yields rising more than 100 basis points (bp) over the next two months. In 2020, he used the same platform to announce the adoption of flexible average inflation targeting.

This year’s event is expected to be more subdued. Fed Chair Powell is likely to adopt a dovish tone while steering clear of providing explicit policy directions. The extent of interest rate cuts for September and beyond seems to depend heavily on upcoming labour market data, making the August employment report due on 6 September a crucial piece of the rate jigsaw puzzle.

Fed rate cut speculations intensify

As the week begins, the rates market is pricing in 31 bp of Fed rate cuts for the 19 September FOMC meeting and 95 bp of cumulative cuts before year-end. Just two weeks ago, the market was pricing in 42 bp of cuts for September, with a total of 115 bp expected by year-end.

Nasdaq 100 technical analysis

At the end of last week, the Nasdaq 100 reached the 19,500 target level outlined in last Monday's Wall Street update here.

"While it remains above a strong band of support at 17,700/17,400, consisting of the 200-day moving average at 17,727 and uptrend support at around 17,400 (from the December 2022 low of 10,671), allow for the recovery to extend towards 19,500."

At this point, we believe the next significant move is a 50/50 proposition. We are moving to the sidelines, waiting for further clues, with a focus on NVIDIA's crucial earnings release on 28 August and the typically challenging month of September.

Nasdaq 100 daily chart

S&P 500 technical analysis

In last Monday's update, we noted that provided the S&P 500 remained above the recent 5119 low, the recovery would extend towards 5400.

Since then, the S&P 500 has traded above 5400 to a high of 5561. We are currently 50/50 on whether it will challenge the 5,669 record high or pull back first.

Given this uncertainty, we are content to stay on the sidelines, keeping a close watch on NVIDIA's important earnings report on 28 August and the seasonally challenging month of September.

S&P 500 daily chart

• _{Source: TradingView. The figures stated are as of 19 August 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}