The S & P 500 index dipped on Friday but ended the week with a third straight weekly gain, propelled by record closes the previous week. The Dow Jones Industrial Average also closed at another record high on Friday, while the Nasdaq remained slightly below its all-time closing high from July 10. Despite the slight dip on Friday, the S & P 500 rose just over 0.6% for the week, the Dow gained almost 0.6%, and the Nasdaq advanced nearly 1%. Inflation remained under control, with the 10-year Treasury yield moving lower, creating a positive backdrop for investors.
The latest inflation numbers from the Fed’s preferred measure showed a tame increase in the personal consumption expenditures (PCE) price index. The headline PCE price index rose 2.2% year over year, lower than estimates and the smallest increase since February 2021. Core PCE, which excludes volatile food and energy prices, rose 2.7% year over year, right in line with expectations. With inflation under control, fewer than expected jobless claims, and a solid reading on second-quarter economic growth, investors felt comfortable holding onto stocks. The market expects further Fed rate cuts by year-end, with moderating inflation and a resilient economy supporting stock ownership.
Stocks were trading in an overbought state which prompted reevaluation of positions. Trimming of some stocks was done to potentially capitalize on future price movements. Costco reported earnings last week, with quarterly numbers that were considered just okay but still showed reasons for investors to hold onto their positions. The company’s price target was increased, but a wait-for-a-pullback 2 rating was maintained in case of any downward movement. Investors are now looking ahead to quarterly results from Constellation Brands and the September employment report for further insights into the economy’s trajectory.
The upcoming September employment report is expected to have significant implications for Wall Street and the path for further Fed rate cuts. The labor market data will be closely watched as it is the first reading since the central bank began its monetary easing cycle earlier this month. Stable employment and wages are crucial for consumer spending, which drives a significant portion of the U.S. economy. Economists are predicting 150,000 nonfarm payroll additions, a 4.2% unemployment rate, and a 3.8% increase in hourly wages, in line with August data. ADP will also release its hiring trends report as a precursor to the government’s nonfarm payrolls number.
Constellation Brands, a beer company, is set to report its quarterly earnings before Thursday’s opening bell. The company recently updated its sales outlook but raised its earnings per share outlook, reflecting expectations of improved beer margins offsetting sluggish sales growth. Investors will be focused on the company’s ability to enhance beer volumes and margins in the coming quarters, as well as any new strategies for its wine and spirits business. The upcoming week will also see key economic data releases, including the ISM Manufacturing PMI, Factory Orders, and ISM Services PMI, providing further insights into the state of the economy.
