The Standard & Poor’s 500 Index (SP500) rose 1.44% on Friday for the week to close at 5,634.61 points, gaining in three of the last five sessions. The accompanying SPDR S&P 500 ETF Trust (New York: Spy) rose by 1.41% during the week.
Wall Street Reference index (sb 500The index posted a second straight weekly gain, after last week’s 3.93% gain, its best since late October last year.
The S&P 500 posted the bulk of its gains this week on Friday, gaining 1.15% after Federal Reserve Chairman Jerome Powell said it was “time to adjust policy” and that interest rate cuts were coming. He said the weak labor market was now unlikely to provide upward pressure on inflation.
“While Jerome Powell’s comments have provided a lot of excitement for traders, they show how starved the market is of interest rates,” Naeem Aslam, chief investment officer at Zai Capital Markets, said in a note on Friday. “We believe what he said today only matters to a certain extent, as it is the US nonfarm payrolls that will really drive the narrative among traders.” Traders on Friday were expecting a 100 basis point rate cut in 2024.
Goldman Sachs said it still expects the Fed to deliver an initial series of three 25 basis point rate cuts at its meetings in September, November and December. The August employment report is expected to be “stronger” than July’s, but “a 50 basis point cut is likely if the employment report is weak again,” Goldman Sachs economist Jan Hatzius said Friday.
The July jobs report sparked recession fears, a major driver for the S&P 500, which fell more than 8% from its all-time high of 5,667 at the close. But the benchmark index has since rebounded to settle just 0.6% above its July peak as of Friday’s close.
On the S&P 500, the real estate sector led gains on Friday, rising +2%. Optimism in this sector of the market has improved, with mortgage rates falling in anticipation of the Federal Reserve starting its rate-cutting cycle.
The consumer staples sector was also a winner this week, with Target (TGT) shares rising 10% after the retailer raised its fiscal 2024 earnings outlook and posted its first positive same-store sales in more than a year.
Next week, chipmaker Nvidia (NVDA) will be the headline earnings call, with the world’s second-most valuable company providing a snapshot of demand for artificial intelligence products and services.
Looking at the weekly performance of the S&P 500 sectors, 10 of the 11 sectors ended the week higher. Real estate was the biggest gainer, up +3% after being one of the biggest losers last week. Materials was the second-biggest gainer, up +2%. Energy was the only loser. Here’s a breakdown of the sector performance and their accompanying SPDR Select Sector ETFs from the close of August 16 to the close of August 23:
#1: Real Estate +3.63%and the SPDR Real Estate Select Sector Fund (XLRE) +3.61%.
#2: Materials +2.31%and Materials Select Sector SPDR Fund (XLB) +2.38%.
#3: Discretionary Consumer Goods +2.09%and the Consumer Discretionary Select Sector SPDR ETF (XLY) +2.59%.
#4: Industries +1.78%and the Select Industrials SPDR Fund (XLI) +1.82%.
#5: Health Care +1.73%and the Healthcare Select Sector SPDR Fund (XLV) +1.69%.
#6: Consumer Staples +1.60%and the Consumer Staples Select Sector SPDR Fund (XLP) +1.65%.
#7: Financial Affairs +1.53%and the Select Financial Sector SPDR Fund (XLF) +1.51%.
#8: Facilities +1.21%and the Utilities Select Sector SPDR Fund (XLU) +1.32%.
#9: Communication Services +1.21%and the Select Communications Sector SPDR Fund (XLC) +1.44%.
#10: Information Technology +1.07%and the Technology Select Sector SPDR Fund (XLK) +1.16%.
#11: Energy -0.49%and the Select Energy Sector SPDR Fund (XLE) -0.08%.
For investors looking ahead to what’s happening, take a look at the Seeking Alpha Catalyst Watch to see details of actionable events in the coming week.
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