U.S. stocks traded flat on Monday, consolidating after last week’s gains as investors awaited further signals regarding the Federal Reserve’s monetary policy outlook.
Wall Street’s major indices recorded their best week so far in 2024, as recent positive data eased fears of a possible recession.
The S&P 500 index gained nearly 3.9%, posting its best week since 2023. The tech-heavy Nasdaq Composite added 5.2%, while the blue-chip Dow Jones Industrial Average rose 2.9%.
Recessionary Prospects Decline
The previous week’s rally came after a turbulent start to the month following the disappointing July nonfarm payrolls reading.
However, July’s ISM non-manufacturing index rebounded, with its employment component entering the expansionary zone for the first time since November last year, according to economists.
In addition, July retail sales exceeded estimates, indicating a marked growth in real consumption, and initial jobless claims have fallen over the past two weeks.
Goldman Sachs has revised its one-year US economic recession forecast to 20% from 25%, citing the latest economic data that indicate no signs of a slowdown.
The increase was midway between the long-term average recession probability of 15% – based on the historical occurrence of one recession every seven years – and the 35% estimate during the banking turmoil in early 2023.
Investors will focus this week on the minutes of the Fed’s latest meeting, due out on Wednesday, ahead of Fed Chairman Jerome Powell’s speech at Jackson Hole next Friday.
Earnings Season Continues
Earnings season continues this week, with results due on Monday from Palo Alto Networks (PANW) and Estée Lauder (EL).
Bank of America’s most recent survey of fund managers indicated a decline in the proportion of investors overweight equities, from 51% to 31%.
The survey also highlighted that 40% of investment managers are pushing for CEOs to improve their companies’ balance sheets. Despite the current AI boom, the desire to increase capital expenditure has fallen to 24%, the lowest level since November 2023.
Crude Oil Prices On The Lookout For Gaza Ceasefire Talks
Crude oil prices fell on Monday due to concerns over weaker demand in top oil importer China, while ceasefire talks in the Middle East remain in focus.
Attention is now focused on Gaza ceasefire talks, which will continue this week in Cairo after a two-day meeting in Doha the week before.
U.S. Secretary of State Antony Blinken on Monday called Washington’s latest diplomatic effort to reach a Gaza ceasefire agreement “perhaps the best and last chance” and urged all sides to reach an agreement that would get them over the finish line.
The urgency to reach a ceasefire agreement has grown amid fears of an escalation of hostilities across the region, an upsurge that could impact on supplies to the oil-rich area.
