U.S. stocks closed higher on Friday, capping off their biggest weekly percentage gains of the year. This market rebound comes as concerns about an economic downturn have subsided, with investor attention now turning to the upcoming Jackson Hole Economic Symposium.
The S&P 500 and the Nasdaq both recorded their seventh consecutive day of gains, recovering from the steep declines experienced two weeks ago. The recent sell-off, driven by weak economic indicators and heightened fears of a recession, had pushed the Nasdaq into correction territory.
All three major indexes—S&P 500, Nasdaq, and Dow Jones—posted their largest weekly percentage increases since late October. For the S&P 500 and Nasdaq, this marked their first weekly gain in five weeks.
“What we’re seeing in today’s markets is a continuation of the recovery and a calming of earlier recession fears,” said Greg Bassuk, CEO of AXS Investments in New York. “The positive economic data is driving this rally, boosting investor confidence that a recession is likely to be avoided and that the Fed may begin cutting rates in September.”
This week’s slew of economic data, including the Labor Department’s consumer price index and a retail sales report from the Commerce Department, provided reassurance that inflation is gradually moving towards the Federal Reserve’s 2% target and that consumer spending remains robust.
On Friday, data revealed a dip in U.S. single-family housing starts to a near 1.5-year low in July, while the University of Michigan’s preliminary reading on August consumer sentiment showed a stronger-than-expected improvement.
Global central bank officials are set to convene at the Jackson Hole symposium in Wyoming next week, with Fed Chair Jerome Powell’s keynote speech on Friday expected to shape market expectations for the Fed’s future rate-cutting path.
“All eyes are going to be laser-focused on Powell’s comments next week,” Bassuk noted. “Market activity this year has been closely tied to the anticipated pace and size of Fed rate cuts.”
Chicago Fed President Austan Goolsbee emphasized in an NPR interview that central bank officials should be cautious about keeping restrictive policies in place longer than necessary.
According to CME’s FedWatch tool, financial markets are currently predicting a 74.5% probability that the Fed will reduce its key policy rate by 25 basis points at the conclusion of its September meeting, with a diminishing 25.5% chance of a larger 50-basis-point cut.
