(910) 319-7834
The stock market continued its record-setting rally this week fueled by a pledge from Beijing to support China’s economy with further stimulus just days after the country unveiled a blitz of polices to reinvigorate its sluggish economy and imploding real-estate market.
Major Index Performances (as of Thursday Close):
- S&P 500: The benchmark index rose about 0.63%.
- Dow Jones Industrial Average: The Dow gained 0.26%,
- Nasdaq Composite: The index increased 1.34%.
This week Micron stole the show in the AI space. The chipmaker blew past expectations beating both revenue and earnings estimates. The tech titan boasted $7.765 billion in revenue. Earnings per share came in at $1.18, well above the expected $1.11. The stock rose as much as 20% before paring its gains. Its results led to a rally in other chip maker stocks like Nvidia and Intel.
Inflation moved closer to the Federal Reserve’s target in August, paving the way to future rate cuts according to the Commerce Department. The personal consumption expenditures price index, closely watched by the Fed, rose 0.1% for the month, putting the 12-month inflation rate at 2.2%, down from 2.5% in July. Keep in mind, however, a decrease in the rate of inflation does not represent prices coming down, it just means prices aren’t increasing as rapidly.
Though the inflation numbers indicated continued progress, personal spending, and income reports came in weaker than expected. Personal income increased 0.2% on the month while spending rose 0.2%. The respective estimates were for increases of 0.4% and 0.3% respectively. We have been warning for some time that consumers are tapped out. If income is increasing less than inflation, purchasing power falls, or credit card debt rises, neither is positive.
In last week’s connection, it was reported that the Federal Open Market Committee, (FOMC) reduced its benchmark overnight borrowing rate by half a percentage point to a target range of 4.75%-5%. This was the first time the central bank had eased since March 2020 when the Covid pandemic was gripping the globe. This reduction was an unusually large move for a Fed that prefers to move rates in quarter-point increments.
Most recently, the Federal Reserve has switched its focus from inflation-fighting to an emphasis on supporting a labor market that has shown some signs of softening. An unemployment rate of 4.5% by year-end and 5% by the end of 2025 will not be surprising. At their meeting last week, policymakers indicated a likelihood of another half-point cut this year and a full point reduction by the end of 2025. Of course, all of this leaves everyone asking, can this market rally last? Though technically the market has some momentum, fundamentally there are several caution flags. Prudent and active money management during uncertain times enables our portfolios to participate in the uptrends of the market, while providing some downside protection and diversification. Money markets continue to offer an attractive alternative to being fully invested while waiting for opportunities to arise.
Have a wonderful weekend,
Your Portfolio Management Team
