SPX: Powell saved the weekThe US equity markets were traded in a more pessimistic way during the previous week, however, a speech held by Fed Chair Powell at Jackson Hole Symposium changed the sentiment on Friday. The market turned from pessimistic to optimistic, after Chair Powell signalled the possibility of easing monetary policy in the coming period, implying potential rate cut. The market expectations shifted, as posted by CME Fed WatchTool investors sentiment jumped to 83% odds for a rate cut in September. All US equity indices gained on Friday, with S&P 500 adding 1,52% and closing the week at 6.466. However, with Friday's move the index only covered losses from the previous four days of the week, adding a modest 0,3% for the week.
Stocks of tech companies traditionally surged on positive news on potential rate cuts. However, this time the market was also driven by a surge in stocks of construction companies as well as the financial industry. Namely, the market estimated that these industries might benefit the most from decreased interest rates. It might be expected that the positive sentiment will hold on financial markets at least for the week ahead. It should be considered that Friday brings the PCE Price index in July, in which sense, some higher volatility might be expected on this day, in case that July figures do not meet market expectations.
