U.S. stocks were broadly flat on Monday after posting their best week in a year. Investors began the countdown to a speech by Fed Chair Jerome Powell in Jackson Hole that could revise expectations for a rate cut.
The S&P 500 (^GSPC) rose 0.1%, hovering near record highs, while the Dow Jones Industrial Average (^DJI) also hovered near the flatline. The tech-heavy Nasdaq Composite (^IXIC) rose 0.1%.
Stocks are set to consolidate last week’s strong gains as calm returns to a market that has been battered by recession worries. Last week’s rally offset losses sustained in an early August selloff that left Wall Street worried about cracks in the economy. Those concerns have since been eased by encouraging inflation and consumer spending data.
The focus is already shifting to Powell’s speech at the central bank’s Jackson Hole symposium on Friday, in a quiet week for economic data. With confidence in a “soft landing” for the economy growing — Goldman Sachs now sees a lower chance of a recession — the question for investors is not whether the Fed will cut rates in September, but by how much.
As of Monday morning, traders were pricing in a 72% chance that the Fed will cut rates by 0.25% at that meeting, and a 28% chance of a 0.50% cut, according to the CME FedWatch tool. But Wednesday’s release of minutes from the Fed’s July meeting could affect those bets.
Meanwhile, investors are keeping a close eye on the Democratic National Convention, which kicks off Monday, which could provide more insight into what to expect from presidential candidate Kamala Harris.
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