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Stock Futures Tick Higher as Fed Looms Large

Stock futures were modestly higher to start the week, adding to a streak of market optimism. According to CNBC, “Dow Jones Industrial Average futures edged up 57 points or 0.13%. S&P 500 futures and the Nasdaq 100 futures were up 0.14% and 0.21%, respectively” (reported by Alex Harring, CNBC).

That move follows two consecutive winning weeks across Wall Street. “The Dow climbed 1.7%, while the S&P 500 and Nasdaq Composite rose 0.9% and 0.8%, respectively. It was also the fourth week of gains out of the last five for the S&P 500 and Nasdaq” (reported by CNBC).

Small-cap stocks were a particular bright spot. “Small-cap stocks outperformed last week, jumping more than 3% as investors bet on forthcoming rate cuts from the Federal Reserve” (CNBC). Similarly, Investopedia noted, “Speculative, meme, and small-cap stocks could get a boost from a supportive inflation print, which showed July CPI up 2.7% year-over-year” (reported by Mark Kolakowski, Investopedia).

Much of the focus now shifts to the Jackson Hole Economic Policy Symposium in Wyoming, where central bankers, economists, and investors await remarks from Fed Chair Jerome Powell. As Reuters highlighted, “Wall Street will train its sights on Jackson Hole… Powell’s speech will be scrutinized for clues on whether the Fed will validate market expectations of rate cuts as early as September” (reported by Lewis Krauskopf, Reuters).

The CME FedWatch tool currently indicates overwhelming conviction that cuts are imminent. “Fed funds futures are pricing in a nearly 85% likelihood that the central bank cuts rates at its next policy meeting in September,” CNBC reported. Some analysts expect Powell to support easing, while others believe he may cool expectations to avoid overconfidence in the markets.

Meanwhile, sector-specific moves tell their own story. “Investors are plowing into homebuilder stocks, betting that lower borrowing costs will fuel housing demand. The iShares U.S. Home Construction ETF posted double-digit gains last week, reflecting that optimism” (reported by Joy Wiltermuth, MarketWatch).

Beyond Fed speculation, corporate earnings continue to roll in. This week brings reports from some of the country’s largest retailers. “Big-box retailers, including Home Depot, Lowe’s, Walmart, and Target, are among the major companies slated to release results this week” (CNBC). With over 92% of S&P 500 firms having already reported, the numbers remain encouraging. “Almost 82% have surpassed Wall Street’s expectations,” CNBC added.

Even so, debate continues over consumer resilience. Ross Mayfield, investment strategist at Baird Private Wealth Management, wrote that the S&P 500 Equal Weight Consumer Discretionary Index hitting an all-time high suggests “tariff-driven economic fears may be overblown” (CNBC). He added: “With the market’s message quite upbeat…it raises the question of whether the conventional wisdom about a weakening U.S. consumer and potential stagflation is missing the mark.”

Markets seem caught between two stories: the optimism of strong earnings and falling inflation, and the uncertainty around the Fed’s next move. I think the balance remains tilted toward optimism. When nearly 82% of companies beat expectations, it’s hard not to see resilience in the economy. At the same time, betting too heavily on Powell to deliver exactly what Wall Street wants could be risky. If he even hints at caution in Jackson Hole, some of this momentum might cool off. Still, for now, the market looks like it’s in “glass half full” mode, and maybe that’s not such a bad thing.

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