U.S. stocks were broadly flat on Monday after posting their best week in a year, as investors counted down to Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole that could reset interest rate cut expectations.
S&P 500 futures (ES=F) were flat but still near record highs, while Dow Jones Industrial Average futures (YM=F) were flat. The tech-heavy Nasdaq 100 (NQ=F) was down 0.1%.
Stocks are expected to extend last week’s strong gains as calm returns to a market that had previously been rocked by fears of a possible recession. Last week’s rally has clawed back losses from a selloff in early August as Wall Street fretted about cracks in the economy — concerns that have since been eased by encouraging data on inflation and consumer spending.
The focus has already shifted to Powell’s speech at the central bank’s Jackson Hole symposium on Friday, in a quiet week of economic data. With confidence growing in the “soft landing” of the economy — Goldman Sachs now sees a lower chance of a recession — the question investors are asking is not whether the Fed will cut rates in September, but by how much.
As of Monday morning, Merchants do pricing. According to the CME FedWatch tool, the odds of a 0.25% rate cut at that meeting are 72%, and the odds of a 0.50% cut are 28%. But the release of the minutes from the Fed’s July meeting on Wednesday could change those bets.
Meanwhile, investors will also be watching the Democratic National Convention that begins on Monday, which could provide more insight into what to expect from presidential candidate Kamala Harris.