[New York Stock Market] Rising Ahead of Jackson Hole Meeting... S&P and Nasdaq Up for 8th Consecutive Day

Relief on Inflation and Retail Sales Data
Recovery Rally Continues
Attention on Powell's Jackson Hole Speech on the 23rd

The three major indices of the U.S. New York stock market all rose on the 19th (local time). Ahead of the Jackson Hole meeting scheduled for this week, buying momentum revived, continuing the recovery rally.

On that day in the New York stock market, the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 40,896.53, up 236.77 points (0.58%) from the previous trading day. The S&P 500 index, focused on large-cap stocks, rose 54 points (0.97%) to 5608.25, and the Nasdaq index, centered on tech stocks, jumped 245.05 points (1.39%) to close at 17,876.77. Both the S&P 500 and Nasdaq indices rose for eight consecutive trading days for the first time this year.

Earlier this month, the stock market plunged amid concerns of a cooling labor market and recession due to rising unemployment. However, since last week, the market has been shaking off recession fears and continuing a recovery rally. Inflation and retail sales data released last week helped calm market anxiety. The July Consumer Price Index (CPI) rose 2.9% year-on-year, dropping into the 2% range for the first time since March 2021. It was below both the forecast and the previous month’s figure (each 3.0%). July retail sales, which account for two-thirds of the U.S. real economy, increased 1% month-on-month, exceeding both the forecast (0.4%) and the previous month’s decline (0.2%), easing recession concerns.

Greg Marcus, Managing Director at UBS Private Wealth Management, said, "The market has almost fully recovered from the exaggerated recession fears earlier this month," adding, "However, the economy is slowing, and conflicting economic data are likely to persist over the next few months, so the recession debate will continue." He also said, "We expect volatility to remain at a high level for the rest of this year."

On the same day, the New York Federal Reserve released survey results indicating increased employment insecurity among American workers. According to the New York Fed’s "July SCE Labor Market Survey," the average probability of unemployment within four months, indicating job loss, was 4.4%. This is up from 3.9% a year ago and the highest level since 2014. The proportion of workers who said they had been looking for a job in the past four weeks rose to a record high of 28.4%, up from 19.4% a year ago. However, as various economic indicators point in mixed directions, the trend in the labor market is expected to be confirmed in the U.S. Labor Department’s August employment report to be released on the 6th of next month.

Michael Wilson, strategist at Morgan Stanley, analyzed, "A strong jobs report that reverses the July slowdown would provide confidence that growth risks have subsided," but added, "If a weak report comes out, growth concerns are likely to resurface."

Investors are focusing on the Jackson Hole meeting, which will be held over three days starting on the 22nd in Wyoming. The Jackson Hole meeting is an annual economic policy symposium attended by central bank officials from major countries. It is expected that hints regarding the Federal Open Market Committee (FOMC) interest rate decision in September can be gleaned from the speech by Jerome Powell, Chair of the U.S. Federal Reserve, scheduled for the morning of the 23rd.

The Fed is expected to begin its first rate cut in September. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day reflected a 77.5% probability that the Fed will cut rates by 0.25 percentage points in September. The possibility of a 0.5 percentage point cut, which surged to the 80% range earlier this month amid recession fears due to rising unemployment, has now dropped to 22.5%.

In addition to the Jackson Hole meeting, attention is also focused on the July FOMC minutes to be released on the 21st and last week’s new unemployment claims to be announced on the 22nd. Speeches by Raphael Bostic, President of the Atlanta Fed, and Michael Barr, Vice Chair of the Fed, scheduled for the 20th, are also attracting attention. Furthermore, the Democratic National Convention, held from the 20th to the 22nd in Chicago, Illinois, is a major event drawing market interest. Vice President Kamala Harris will be officially confirmed as the Democratic presidential candidate at this convention.

Government bond yields remained steady. The U.S. 10-year Treasury yield, a global benchmark for bond yields, fell 1 basis point (1bp = 0.01 percentage points) from the previous trading day to 3.87%, while the 2-year Treasury yield, sensitive to monetary policy, traded at the previous day’s level of 4.07%.

By stock, U.S. semiconductor company AMD rose 4.52% on news of acquiring ZT Systems. Cosmetics company Est?e Lauder fell 2.23% after disappointing quarterly results and annual outlook were announced. Coffee chain Dutch Bros dropped 3.92% after investment bank Piper Sandler downgraded its investment rating from "overweight" to "neutral."

International oil prices fell about 3% due to Middle East ceasefire negotiations and concerns over weakened demand from China’s economic slowdown. West Texas Intermediate (WTI) crude oil closed at $74.37 per barrel, down $2.28 (3%) from the previous trading day, and Brent crude, the global oil price benchmark, closed at $77.66 per barrel, down $2.02 (2.5%).