Financial markets had a big rebound this past week, and for once the Federal Reserve had very little to do with it.
You may remember stocks absolutely tanked on Aug. 5: The Dow fell more than 1,000 points. The S&P 500 and Nasdaq Composite indexes dropped more than 3% each. Global markets were roiled, especially after Japan's Nikkei 225 index fell 12% in a day.
Fears erupted: A recession was about to take hold. A few pundits asked the Fed to say something — anything — to reassure investors. Some begged for an emergency Fed meeting to cut interest rates.
The Fed said, well, nothing, or next to nothing. Rates were left alone.
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Investors and pundits were left to decide that the turmoil was a one-off issue, and by the end of that week markets were on the mend.
Stocks finished with their best weekly showing since early November. The Dow jumped 2.3%. The S&P 500 was up 3.9%. The Nasdaq jumped 5.3%. The closing levels were basically where markets had ended on Aug. 2.
And the worry about Aug. 5? Did something happen on Aug. 5?
On Friday morning Fed Chairman Jerome Powell will finally speak, capping a week that offers several economic and earnings reports that could move markets.
Will Jerome Powell have some good news on rates?
The Fed chairman's remarks will come at the annual Jackson Hole Symposium of central bankers in the Grand Teton mountains in Wyoming. Powell will probably talk about the progress the U.S. has made on the inflation front.
Listen for the hints he probably will throw out about the interest-rate cut widely expected to be agreed to at the Fed's Sept. 17-18 meeting.
Speculators are betting the Fed's key federal funds rate will be cut to 5% from the current 5.25% to 5.5%.
Bond yields have been falling steadily, if slowly. The 10-year Treasury yield ended Friday at 3.95% a week earlier and, more important, down by 22% from the 5% level reached in October 2023.
Mortgage rates have been coming down, too. The 30-year mortgage was about 6.6% on Friday, according to Mortgage News Daily. A survey released Thursday by Freddie Mac, which supplies capital to the mortgage industry, said the rate was about 6.5%.
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On a $250,000 mortgage, that translates into a monthly interest-and-principal payment of about $1,580, down nearly 9.8% from April, when rates were 7.5%.
The drift lower may not have pushed potential homebuyers to call brokers to see houses. The pandemic and higher mortgage rates have depressed sales since early 2021. But refinancing applications jumped 35% in a week.
Powell's speech will be the last big housing event of the week. Also of intense interest will be:
- The existing-home-sales report for July from the National Association of Realtors, due Thursday morning. The consensus is for a sales rate of 3.92 million units, up slightly from June. Sales have been sluggish since the Fed started raising interest rates in 2022. June sales were down 5.4% from May. In early 2021, the sales rate was 6.2 million units.
- The Commerce Department's new-home-sales report, also for July, due Friday morning before Powell speaks. The estimate is a sales rate of 628,000 homes, condos and the like, up 1.8% from June.
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Also on tap will be Wednesday's release of minutes from the previous Fed meeting in July. These will also shed light on the central bank's stands on inflation and interest rates.
Palo Alto Networks earnings may dip as revenue grows
The week's top earnings report this week may come from Palo Alto Networks (PANW) , the big cybersecurity firm.
The company's ambitions are big because the task is so great. Cybercriminals can get in and out of a company's infrastructure in as little as three hours, CEO Nikesh Arora told a security conference in June.
The company is expected to report $1.41 a share for the fiscal fourth quarter, down from $1.44 a year earlier. Revenue should be up 10% to 11% from a year earlier at $216 billion.
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Lowe's and Target top earnings calendar
Home Depot (HD) , Starbucks (SBUX) and Home Depot (HD) noted in earnings presentations last week that many customers are much more careful in their spending as the domestic economy shows signs of slowing.
Two of the bigger reports this coming week may discuss that question in reports and earnings presentations as well.
Lowe's (LOW) , due Tuesday, and Target (TGT) , on Wednesday, will probably acknowledge that reality, too.
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Lowe's shares are up 8.4% in 2024 but are off 1.8% in August. The archrival of Home Depot has a strong franchise around the country. Earnings are estimated at $3.96 to $3.98 a share, down from $4.56 a year earlier. Revenue is pegged at $23.96 billion.
Target is up 1.1% this year but down 4.2% in August. The giant retailer is still struggling to right the business after years of malaise. The good news is that the consensus estimate for second-quarter earnings is $2.19 a share, up 53% from $1.43 a year earlier. Revenue is projected at $25.2 billion, up 1.2%.
Also reporting this week
- Cosmetics company Estee Lauder (EL) . Earnings Monday. EPS estimate: 25 cents, up from 7 cents a year ago.
- Medical device maker Medtronic (MDT) , Earnings Tuesday. EPS estimate $1.20, unchanged from a year ago.
- Off-price retailer TJX (TJX) . Earnings Wednesday. EPS estimate 92 cents, up from 85 cents a year ago.
- Department store operator Macy's (M) . Earnings Wednesday. EPS estimate 31 cents, up from 26 cents a year ago.
- Fashion retailer Urban Outfitters (URBN) . Earnings Wednesday. EPS estimate: 97 cents, down from $1.10 a year ago.
- Software company Intuit (INTU) . Earnings Thursday. EPS estimate: 54 cents, up from 40 cents a year ago.
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