U.S. stocks climbed on Friday, capping off the strongest week of 2024, as the market rebounded from the sharp downturn seen earlier in August.
The S&P 500 edged up 0.2% to 5,554.25, while the Nasdaq Composite rose 0.21% to 17,631.72. The Dow Jones Industrial Average also gained 96 points, or 0.24%, to close at 40,659.76.
For the week, the S&P 500 surged nearly 3.9%, marking its best performance since November 2023. The Nasdaq advanced 5.2%, and the Dow added 2.9%.
Last week's rally has brought the S&P 500 within 2% of its mid-July record high. Positive data, including stronger-than-expected retail sales and a drop in weekly jobless claims, eased market jitters. Inflation figures earlier in the week also supported optimism for a potential soft landing, countering recession concerns that had fueled a global sell-off earlier this month.
For this week, markets will center on several key economic events, including the release of jobless claims and existing home sales data on Thursday, along with the minutes from the July FOMC meeting, which will be published on Wednesday.
In addition, several Federal Reserve officials are scheduled to speak, including Governor Waller, President Bostic, and Chair Powell, who will deliver the keynote address on Friday at the Jackson Hole Economic Policy Symposium.
“Regarding Powell's speech on Friday, the main focus will be his signals about the timing and pace of rate cuts over the coming months,” Deutsche Bank economists said in a recent note.
“There are good arguments for our baseline view of consecutive 25bps cuts at each of the next three meetings. However, there are also compelling points for moving faster. Ultimately, we think data dependence by the Fed could limit the forward guidance Powell provides as it will be difficult to pre-commit to a particular trajectory.”
Separately, Nomura economists said they do not anticipate Powell's speech to explicitly address the pace of rate cuts or the potential for a larger 50 basis point reduction in September. They believe he is likely to acknowledge that the Fed is ready to act swiftly if labor markets weaken.
"That said, we expect his remarks to be more balanced than at the July press conference – noting upside inflation risks, as well,” Nomura’s team noted.
Given the recent resilience in growth data and stability in financial markets, Nomura expects Powell to emphasize the Fed's ability to remain patient and data-dependent, subtly countering recent market expectations for a more aggressive start to the easing cycle.
Earnings spotlight: Which companies will report this week?
While the Jackson Hole symposium will likely attract the bulk of the attention this week, the Q2 earnings season is still underway, with several highly anticipated reports yet to be released.
For this week, key earnings results include those from Palo Alto Networks (NASDAQ:PANW), XPeng (NYSE:XPEV), Snowflake (NYSE:SNOW), and Zoom Video Communications (NASDAQ:ZM). Moreover, Chinese internet and AI giant Baidu (NASDAQ:BIDU) and software maker Intuit (NASDAQ:INTU) will report.
Retailers will also be in focus as updates are expected from Target Corporation (NYSE:TGT), Lowe's (NYSE:LOW), Macy's (NYSE:M), Ross Stores (NASDAQ:ROST), TJX Companies (NYSE:TJX), Estee Lauder Companies Inc (NYSE:EL) and Urban Outfitters (NASDAQ:URBN).
What analysts are saying about US stocks
Citi: “Our US equity narrative remains mostly intact as the Q2 reporting period winds down. Solid index level EPS growth at 10% reflects both broadening and resultant acceleration. In and of itself, this is notable given mixed macro signals heading into an expected September Fed rate cut. But index-level growth remains reliant on the mega-cap Tech cohort amidst subtle signs of incremental slowing elsewhere. Our $250 estimate for full-year ’24 remains in line of sight albeit with modest downside risk. In turn, we maintain our 5600 year-end S&P 500 base case target.”
Bank of America: “Growth is in the driver’s seat. While the Fed is unlikely to ‘out-dove’ the market at Jackson Hole, as long as growth is OK, equites can withstand a less-dovish Fed. Equities just need a nod that growth is going to be supported by the Fed. While we think the risk could be to the upside, the magnitude may be capped heading into NVDA earnings the following week. Our thesis for continued rotation remains intact: 1) rate pressure has eased, 2) growth will ultimately be supported by the Fed, and 3) earnings are broadening out.
Evercore ISI: “Strong earnings coupled with expansionary PMIs, still okay EVR ISI company surveys and ongoing real wage growth support the Consumer and raise potential for Fed cuts into a Soft Landing. Such a scenario skews equities’ trajectory higher. It also adds to conviction around adding exposure to “AI Revolutionaries” amid potential “Air Pockets” which are normal occurrences in structural bull markets. Small caps too would benefit from a more favorable rate regime and a Soft Landing. EVR ISI Strategy forecasts the S&P 500 to end 2024 at 6,000.”
Goldman Sachs: The macro backdrop has distracted many investors from fully appreciating the strength of the 2Q earnings season. 56% of S&P 500 firms beat consensus EPS forecasts by more than a standard deviation of estimates, above the long-term average of 46%. We maintain our 2025 EPS estimate of $256 (+6% growth), which is below top-down and bottom-up consensus. Our 2025 sales growth estimate of +4% is slightly below the bottom-up consensus, but our forecast for margins to expand by 24 bp to 11.7% is well below consensus. Micro dynamics, including one-time charges and the Semis cycle, imply upside risk to our margin forecast, but downside macro risks are also present.”