Jackson Hole, key retail earnings, and fresh economic data: Here's everything the stock market is watching this week
Get ready for another big week for the stock market.
Investors are staring at a handful of catalysts on the radar this week, with a slew of fresh earnings reports and key signals from the Fed on the docket.
All could be influential in determining the path ahead for Fed rate cuts — a bullish catalyst investors have been waiting for all year. Odds for a cut next month have edged down slightly since last week, but markets are still pricing in an 85% chance the Fed will cut rates by a quarter of a percentage point at the September meeting, according to the CME FedWatch Tool.
Here’s what investors will be reacting to this week.
Fed minutes
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Investors will be paying close attention to the minutes from the Fed’s July policy meeting on Wednesday.
The meeting minutes will give markets more insight into the central bank’s thoughts about inflation, the strength of the US economy, and its outlook for rate cuts going forward.
It comes at a crucial time for the Fed, which is at a crossroads over the direction of monetary policy. Powell has continued to signal this year that the Fed is comfortable keeping rates steady, as officials wait to see the inflationary impact of tariffs.
But inflation data has been mixed recently. Consumer prices rose in-line with economists’ expectations last month, but wholesale inflation rose more than expected in the latest producer price index, a sign that more inflationary pressures could be building.
Meanwhile, the job market has shown signs of cooling. The US added fewer jobs than expected in July, while job gains in May and June were revised downward by a combined 258,000.
“Traders will be closely watching the minutes for more insight into the future rate-cut trajectory,” Aaron Hill, an analyst at FP Markets, wrote in a note. “Still, the slowdown in the labour market data, as noted above, firmly swung the pendulum in favour of easing policy next month.”
“At the margin, the minutes of the July 29-30 FOMC meeting (Wed) could fill in some blanks about how dug in the doves were and how intransigent the inflation hawks might’ve been in late July,” Ed Yardeni, the president of Yardeni Research, wrote over the weekend.
Retail earnings
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Investors are also waiting on a slew of earnings reports from major retailers this week. Here are the companies on deck to report their second-quarter results:
The coming reports will give investors a glimpse into how the US consumer is faring. Weak earnings are likely to fan concerns about economic growth and raise expectations for a Fed rate cut next month.
Markets are looking at the coming earnings reports as “key signposts” this week, top economist David Rosenberg said.
“In terms of the mood of the US consumer, it is none too good (and as we saw in Friday’s retail sale report, there is a trend in place towards dining in over dining out which is a sure sign of consumer frugality,” the Rosenberg Research founder wrote in a note.
Jackson Hole
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All eyes will be on Fed Chair Jerome Powell on Friday.
The central bank chief is set to speak at the Fed’s annual Jackson Hole symposium, where he’s expected to set the agenda for future rate cuts.
Markets are also eager to see if the Fed Chair comments on the independence of the central bank. President Donald Trump has continued to pressure Powell to lower interest rates, and is narrowing his list of potential Fed candidates.
The speech could “well be a market-mover” this week, Rosenberg added.
“One hawkish surprise could come from any commentary about how the weakness in the labor market of late has come largely from the supply side, and the ‘break-even’ for job growth to keep the unemployment rate steady is far lower than it used to be,” Rosenberg wrote.
“We expect the Federal Reserve to use Jackson Hole as an opportunity to prepare the markets and signal towards a 25 basis point cut in September and a potentially accommodating stance through year-end. Since this will be Powell’s last Jackson Hole conference as Fed Chair, he’ll likely reinforce the need for Fed independence from the Executive Branch,” Richard Saperstein, the chief investment office of Treasury Partners, wrote in a note.
Stocks could see some selling pressure once Powell speaks on Friday, strategists at Bank of America wrote in a note last week.
“Dovish Powell at Jackson Hole = buy rumor, sell fact profit-taking,” a team led by Michael Hartnett said.