Last Week's Recap
The US Market - S&P 500 closed above 5,700
Major averages registered weekly gains with the Dow closed at a record on Friday. While the S&P 500 rose 1.36% for the week, capping a big rally that came after the first major easing of interest rate policy by the Federal Reserve in four years.
On Wednesday afternoon, the Federal Reserve slashed interest rates by a supersized half point, its first cut since 2020. In a delayed reaction, the market climbed higher Thursday with the benchmark climbing to a record high.
Fed Chairman Jerome Powell called the big opening move "a sign of our commitment not to get behind" the curve. Fed projections signaled a likelihood of another quarter-point cut at each of the year's final two meetings, bringing the Fed's benchmark overnight bank lending rate to a range of 4.25% to 4.5%. Policymakers currently see another percentage point of rate cuts over the course of 2025.
In a recent report, Piper Sandler chief global economist Nancy Lazar noted that this current easing cycle is reminiscent of two others. History may indicate tough times ahead for the U.S. economy. Namely, in both 2001 and 2007, the Federal Reserve delivered a 50 basis point rate cut following a preceding tightening cycle.
The US Sectors & Stocks - QCOM made a takeover approach to rival INTC
8 sectors in the S&P 500 were in the green for the week with communication services advancing 3.5%, leading the gains.
Chipmaker Intel (INTC) jumped late Friday trading after The Wall Street Journal reported that Qualcomm (QCOM) had approached its fellow chip company about a takeover deal. Early in the week, Intel announced funding from the U.S. government and an alliance with Amazon.com (AMZN). It will get up to $3 billion in direct funding from the federal government to supply chips for U.S. Defense Department programs.
The iPhone 16 series, officially went on sale Friday. Some analysts said demand for the iPhone 16 was weaker than last year's iPhone 15 series. But others noted that shorter wait times were likely due to Apple (AAPL) building more handsets for better availability at launch. Meanwhile, the CEO of T-Mobile said his firm is seeing more sales of iPhone 16 handsets than it did for the iPhone 15, especially the premium Pro versions.
FedEx (FDX) plunged more than 11% after reporting a steep quarterly earnings drop. The delivery giant also lowered its full-year revenue forecast. CEO Raj Subramaniam said industrial demand was softer than expected, while FedEx’s customers continued to shift to cheaper, slower delivery options, which squeezed profits.
Microsoft (MSFT) announced late Monday that it will buy back up to $60 billion of its stock and hiked its quarterly dividend by 10% to 83 cents a share. MSFT stock rose for the week.
Nike (NKE) stock jumped nearly 10% after the announcement of a CEO change. Nike veteran Elliott Hill is taking over for John Donahoe in October. Shares of the company were down about 25% for the year prior to the announcement.
Constellation Energy (CEG) will restart Three Mile Island nuclear plant and sell the power to Microsoft to meet its AI data center energy needs. CEG shares rocketed 30% for the week.
Lennar (LEN) reported better-than-expected fiscal Q3 earnings. Home deliveries increased 16% to 21,516 homes. But the average sales price per home was $422,000, down about 6% compared to a year ago, suggesting increased discounts and incentives used to effect sales. The homebuilder giant also ended the quarter with a backlog of 16,944 homes with a dollar value of $7.7 billion. LEN shares were pulled back from record highs.
Hong Kong Market - HSI climbed nearly 5%
Hong Kong stocks rose, with the city’s benchmark capping its biggest weekly gain in nearly five months, taking cues from a global rally amid optimism that the US economy will achieve a soft landing. The Hang Seng Index (HSI) climbed 4.9% for the week.
The Hong Kong Monetary Authority (HKMA) on Thursday cut its base rate charged via the overnight discount window by 50 basis points to 5.25%, tracking a move by the U.S. Federal Reserve.
Singapore Market - STI extended a 6-week winning run
The benchmark Straits Times Index rose 1.74% this week on Fed’s jumbo rate cut, taking its year-to-date gains to 11.87% and extending a 6-week winning run. Much of the advance was driven by REITs, which are getting a boost from potentially lower rates. Meanwhile, banking shares have performed well thanks to strong dividend expectations and solid loan growth.
DBS Group aims to double fees from wealth management by 2027 as more of the world’s affluent investors shift their assets to Asia.
Australian Market - ASX set a record for the sixth straight session.
Australian shares scaled a fresh top on Friday, tracking a global wave of optimism that the US Federal Reserve will deliver a much-hoped soft landing in the world’s largest economy. The benchmark ASX 200 added 1.3% for the week, setting a record for the sixth straight session.
Some of the tech names powering ahead include family tracking app Life360 (ASX: 360) and buy now pay later player Zip (ASX: ZIP). Shares in the big banks were all higher, with National Australia Bank (ASX: NAB) shares rising particularly to hit a 17-year peak.
The coming week will be a big test of the continuing dividend trade with a peak of $14.4 billion of dividends set to flow into investor’s bank accounts. Of course, rises are always accompanied by worries and there is no shortage of brokers pointing to overvalued shares such as Commonwealth Bank (ASX: CBA) as investors continue to reinvest their chunky dividends into a market that has been rewarding risk.
The Week Ahead
Macro Factors - PCE reading and Fed officials speak
The biggest question for investors this upcoming week is whether a new batch of data supports Fed Chair Powell's assertion that the US economy remains strong. A second quarter GDP reading due Thursday will help test that contention. Friday's scheduled release of the Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge, will offer another progress report on that front. Meanwhile, several officials will deliver economic highlights in their public speeches.
GDP growth is expected to remain unchanged from the BEA's second estimate of 3%. The consensus call for August PCE is for a 2.3% year-over-year increase, two-tenths of a percentage point less than in July. The core PCE price index, which excludes food and energy prices, is expected to rise 2.7%, after a 2.6% increase in July.
Now that the S&P 500 has made it past 5,700, Fairlead Strategies’ Stockton said she is carefully monitoring that level over the next few days to see whether the breakout can continue — though some signs of exhaustion are giving her pause. The technician, who anticipates a seasonal correction in October, expects a confirmation would also minimize any pullback next month, while a breakdown could signify a deeper one.
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