Stocks on Wall Street closed out the month of August with solid gains, marking the fourth straight winning month for the market. The S&P 500 rose 1% as about 76% of the stocks in the index notched gains. The Dow Jones Industrial Average also rose, setting its fourth all-time high for the week, while the Nasdaq composite ended the day 1.1% higher. Wall Street spent the day digesting reports on inflation, consumer spending, and income, with the Commerce Department reporting a slight increase in prices from June to July.
Economists had expected the PCE, the Federal Reserve’s preferred measure of inflation, to show a slight increase to 2.6% in July, but the actual rate remained unchanged at 2.5%. This confirms that price increases are cooling, giving the central bank room to cut rates for the first time in over four years. Market expectations are that the Fed will cut its benchmark rate by 1% by the end of the year. Bond yields were mixed in the Treasury market, with the yield on the 10-year Treasury rising slightly to 3.92%. Technology stocks led the market on Friday, with Marvell Technology, Broadcom, and Nvidia all seeing gains.
While most U.S. earnings and economic growth updates in August were positive, stocks historically perform poorly in September. Since 1950, the S&P 500 has finished higher in September only 43% of the time, making it the worst month for stocks. Investors will be closely watching the government’s latest monthly jobs report next Friday for clues on the Fed’s next move. Economists are expecting the economy to have added 155,000 jobs in August, following a gain of 114,000 the previous month. The trends in retail sales, employment, and consumer confidence in August have encouraged Wall Street, but the historical performance in September remains a concern.
In Europe, markets initially rose following a report showing inflation fell sharply in the European Union, setting up the European Central Bank to cut interest rates next month. However, major stock indexes in the region turned red by late afternoon. Markets in Asia saw gains, with Japan’s benchmark Nikkei 225 adding 0.7% to finish at 38,647.75 after positive data on the country’s economy. U.S. stock exchanges will be closed Monday for the Labor Day holiday. Overall, the positive economic indicators in the U.S. throughout August have boosted investor confidence, even as concerns about September’s historically poor performance linger.
The solid gains in the U.S. stock market in August were driven by positive reports on inflation, consumer spending, and income, as well as strong earnings from tech companies like Marvell Technology and Dell. The Federal Reserve’s expected rate cut next month is also contributing to the market’s optimism, with economists predicting a 1% cut by the end of the year. While historical trends suggest that September may be challenging for stocks, the encouraging economic data in August has set a positive tone for investors heading into the fall. The upcoming monthly jobs report will provide further insight into the health of the U.S. economy and the Fed’s potential next steps. Markets around the world are reacting to economic indicators and central bank actions, with some regions seeing gains and others experiencing more volatility. Investors will continue to monitor developments closely as they navigate the changing market landscape.
