Eric Criscuolo:
Hello, I'm Eric Criscuolo, Market Strategist at the New York Stock Exchange, and this is Market Storylines. Every week, we're here to keep you up to date on the key trends and events driving global markets. As we record this Thursday afternoon, let's dive into this week's Market Storylines.
The event getting most of the attention is Federal Reserve Chair Powell's speech on Friday at the Jackson Hole symposium, and we'll get to that in a moment. The week started with President Trump meeting with Ukraine President Zelenskyy, and other European leaders at the White House. Following up on his meeting last Friday with Russian President Putin, it was a major geopolitical event but it had more impact on history books than financial ledgers.
For example, the S&P 500 responded by trading in a seventeen-point range on Monday, which was the smallest intraday range we've seen this year. The action picked up the next day when a rotation trade kicked in, tech and mega-cap stocks came under pressure. Major AI names traded down sharply, stocks on the growth and the momentum side of things sold off. Crypto-related equities came under significant pressure across the board. Investors rotated out of year-to-date leaders and into the year-to-date laggards.
On Wednesday, the minutes from the latest FOMC meeting were released, a highly anticipated appetizer for Powell's speech on Friday. The minutes showed broad support for holding rates steady at the July meeting outside of the two dissensions from Fed Governor Waller and Vice Chair Bowman. Remember though that the actual meeting happened right before the July jobs report came out, which included big revisions and led to a steep repricing of September rate cut expectations, as well as to President Trump firing the head of the BLS. This all leads into the main course, Powell's speech on Friday.
He will have to navigate an exhausting amount of shifting, diverging and confounding data. In addition to incessant questions about his competence from the administration. His basic options are, one, stay the course and reiterate the decision will be based on the totality of data. Two, shift dovish and line up with the market expectations for a cut. Or three, come out swinging by stressing that inflation remains stubbornly above target with upside risk then mic drop and shotgun a beer like Stone Cold Steve Austin. All right, maybe he doesn't do the last part, but given the environment he has operated in, remember he was fed chair during COVID, I would not fault the man.
In any case, a 25 basis point rate cut has been significantly priced in by the market since the controversial jobs report. Although it has fallen from about 100% chance to a 70% chance. It's not all about the fed though, this week saw a multitude of consumer and retail focus companies report earnings, including Walmart on Thursday. Overall, there were no major surprises and they didn't shift the narrative of pressure on the consumer and general uncertainty. Many of the larger moves were due to company specific reasons. As we record this, the S&P is down about 50 basis points today and a little over 1% for the week. The equal weight index however, is about flat for the week, highlighting the divergence we noted earlier. The small caps haven't been able to take advantage of that however, as the Russell 2000 is down about 1%.
Finally, let's look ahead to next week. It will be the last week of summer vacation for many of the kiddos out there as well as God willing, the end of my home renovation. It'll also be the last week before we move into September. Historically, the worst month for equities, maybe it's different this time. The July PCE reading will be a key piece of economic data in the US as it's the fed's preferred inflation gauge and will provide an important follow-up to Powell's comments tomorrow. NVIDIA will report earnings next week as well, providing a vital update on the AI trade, which has impacted not only tech, but energy, utility, and industrial sectors too.
Now, I want to thank everyone for spending time with us today. Remember, you can watch Market Storylines on tv.nyse.com or on the NYSE YouTube channel. You can also listen every Friday on the Inside the ICE House feed. Thanks for joining me, I'm Eric Criscuolo. We'll talk to you again next week.
Speaker 2:
That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen and follow us on X at ICE House podcast. From the New York Stock Exchange, we'll talk to you again next week. Inside the ICE House.
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties express or implied as to the accuracy or completeness of the information, and do not sponsor, approve, or endorse any of the content herein. All of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell or solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.
