Amid an overbought market, Wall Street saw back-to-back weekly gains last week. This positive momentum was largely driven by the Federal Reserve’s signals of impending interest rate cuts. Fed Chairman Jerome Powell’s speech from Jackson Hole reassured investors by indicating that it was time for policy adjustments, hinting at possible rate cuts in the near future. The market responded positively to this news, with the S & P 500 and Nasdaq both closing the week up nearly 1.5%.
The market is now anticipating a total of 100 basis points in cuts by the end of the year, according to the CME FedWatch tool. This includes a 25-basis-point cut in September, a potential 50-basis-point cut in November, and another 25-basis-point cut in December. Investors are closely monitoring these projections and adjusting their strategies accordingly.
Last week, TJX Companies emerged as the best-performing stock, with a significant gain of over 6.5%. This boost came after the off-price retailer reported a strong quarterly earnings beat and raised guidance. Despite increasing the price target for TJX Companies, analysts are maintaining a 2 rating and are cautious about further investments without a pullback in share prices.
Shares of Palo Alto Networks also rose by 4%, driven by the cybersecurity leader’s strong earnings and positive outlook. Similarly, analysts raised their price target for the stock but maintained a 2 rating. However, Estee Lauder faced a different fate with analysts choosing to sell the stock due to lackluster performance in the prestige beauty market.
Looking ahead, Nvidia’s earnings report after Wednesday’s close is one of the most anticipated releases of the season. Investors are eager to hear about the company’s fiscal 2025 second-quarter performance and its guidance for the future. Expectations are high given the positive signals from Nvidia’s key customers and the overall market setup leading up to the report.
Salesforce is also set to report its fiscal 2025 second quarter. After a disappointing showing in the previous quarter, the enterprise software giant is under pressure to deliver better results. Analysts will pay close attention to management’s commentary on deal activity and business confidence, hoping for signs of improvement in the industry.
Best Buy is another company releasing its earnings before Thursday’s opening bell. Despite solid results in the last quarter, there are concerns about the demand for AI devices and the company’s marketing strategies. Investors will closely monitor the post-earnings call for insights into these critical areas.
In addition to earnings reports, the upcoming week brings crucial economic data releases. The government will provide a second look at U.S. economic growth in the second quarter, along with the PCE price index – the Fed’s preferred inflation gauge. Analysts are expecting headline PCE to increase by 2.5% year over year, and the core rate to rise by 2.7%. Powell’s confidence in inflation trending towards the target level is encouraging, but the actual data will provide more insights into the economy’s health.
The GDP report, also scheduled for release, is expected to show no change from the initial estimate of 3.1% annual growth in the second quarter. This data, along with the price component of the GDP, will offer a comprehensive view of the country’s economic performance. Investors will closely watch these reports to gauge the overall market sentiment and adjust their strategies accordingly.
Wall Street’s recent gains reflect a mix of positive market sentiment, anticipation of rate cuts, and upcoming earnings reports. As investors navigate the market landscape, thorough analysis of stock performance, economic data, and market projections will be crucial in making informed decisions and capitalizing on opportunities.