S stocks surged to close at session highs on Monday, continuing their strong performance from last week, which marked the best week for markets in a year. This sharp rebound follows an early August sell-off that had investors on edge. The S&P 500 (^GSPC) rose nearly 1%, while the Dow Jones Industrial Average (^DJI) gained 0.6%. The tech-heavy Nasdaq Composite (^IXIC) led the charge with an increase of more than 1.4%.
The gains were driven primarily by Technology and Consumer Discretionary sectors, with the S&P 500 notching its eighth consecutive daily win, its longest streak since November of last year, according to data from Bespoke Investment. The Nasdaq also extended its winning streak to eight sessions, buoyed by strong performances from chip giant Nvidia (NVDA) and electric vehicle leader Tesla (TSLA).
This rally comes on the heels of last week’s robust gains, which helped the market recover from losses incurred earlier in August. Investors’ concerns over a potential recession were alleviated by positive inflation and consumer spending data, bringing a measure of calm back to Wall Street. The focus now shifts to the upcoming Jackson Hole symposium, where Federal Reserve Chair Jerome Powell is expected to deliver a key speech.
Market sentiment has shifted towards a “soft landing” for the economy, with Goldman Sachs recently lowering the likelihood of a recession. This shift in confidence is reflected in traders’ expectations for the Federal Reserve’s next move. As of Monday morning, the CME FedWatch tool indicated a 72% probability that the Fed will cut interest rates by 0.25% in September, with a 28% chance of a more aggressive 0.50% reduction.
Wednesday’s release of the minutes from the Fed’s July meeting could provide further insight into the central bank’s thinking and potentially sway market expectations. In the meantime, investors will also be keeping an eye on the Democratic National Convention, which kicks off on Monday. The event is expected to offer more clarity on the policy direction under presumptive presidential nominee Kamala Harris.
The strong performance of US stocks closing at session highs underscores the market’s resilience and growing optimism as investors navigate economic data and Fed policy expectations. As markets continue to rally, the question for investors isn’t just whether the Fed will lower interest rates, but by how much. The answer could set the tone for the rest of the year as Wall Street seeks to balance optimism with caution.
