Good economic data has sparked a stock rally. Here’s what will drive the week ahead
The economic worries that pummeled stocks in early August quieted further in recent days, enabling Wall Street to turn in its best week of the year. The tech-heavy Nasdaq Composite led the way, surging 5.3% on the week, followed by the S & P 500 , which advanced 3.9%, and the Dow Jones Industrial Average , which added 2.9%. It’s the largest weekly gain of 2024 for all three major averages. No Club holdings reported earnings over the past five sessions, but we did get a few important updates on the state of the economy. The July consumer price index on Wednesday — the main report of the week — came in a tick below expectations on the headline level, up 2.9% annually versus 3% expected. Core CPI, which excludes volatile food and energy prices, matched expectations, at 3.2% on an annual basis. A day earlier, we got a weaker-than-expected July producer price index report , which sent the major averages soaring and set the tone for the rest of the week. On Thursday, fewer-than-expected initial jobless claims alongside a much stronger-than-expected July retail sales report painted the picture that the economy is holding up, even as inflation comes down. That’s a goldilocks setup for equities, and it allowed the S & P 500, Dow and Nasdaq to take another leg higher in the back half of the week. An update on the U.S. housing market Friday was disappointing, but not enough to override the positivity. Housing starts came in at a seasonally adjusted annual rate of 1.238 million, below expectations of 1.35 million, according to FactSet. Building permits came in at a seasonally adjusted annual rate of 1.396 million, below the 1.43 million estimate, per FactSet. With quarterly results from the likes of Home Depot and Walmart in the bag, 93% of the S & P 500 has now reported earnings. Of those that have reported, 79% exceeded earnings expectations, while 60% reported better-than-expected revenue, according to FactSet. Looking under the hood of the S & P 500, technology was the top-performing sector, soaring 7.5% in the week. Consumer discretionary and financials — both economically sensitive groups hit hard earlier in August — rose 5.2% and 3.2% to claim second and third place, respectively. Real estate was the worst-performing S & P 500 sector out of 11, though it managed to eke out a 0.07% gain. Energy and utilities were the next biggest laggards, but still rose 0.85% and 0.97%, respectively. The macroeconomic calendar is thin over the next five trading sessions, so expect corporate results and management commentary to drive the action on Wall Street. Economy: After a busy past few days, this coming week is pretty light on economic updates. But the state of the U.S. housing market will be in focus. On Thursday, the July existing home sales report is set for release followed by the new home sales report a day later. Housing costs remain a sticky source of inflation, with the shelter index in this week’s CPI report showing a 5.1% year-over-year increase. For that reason, any indication that more people are willing to put their homes up for sale as interest rates come down should be viewed as a positive for affordability and, in turn, the U.S. economy. The more supply on the market, the better it is for buyers. We like to say that housing “punches above its weight” in terms of economic impact because new home formation means increased demand for everything from furniture to utilities to services like internet and so on. Fed speak: Also on Friday, we’ll be hearing from Federal Reserve Chair Jerome Powell at the annual central bank gathering in Jackson Hole, Wyoming. Investors will be listening for Powell’s latest thoughts on the U.S. economy, especially the labor market. A lot has happened since the Fed’s late July policy meeting, when Powell signaled an interest rate cut could be on the table in September if the inflation and jobs data continued to show easing price pressures and softening in the labor market. Days after those remarks, the weaker-than-expected July jobs report sparked concerns about an impending U.S. recession , only for those fears to subside thanks to more encouraging data points in recent days. Earnings : On the earnings front, we’ll hear from Club holdings Estee Lauder , Palo Alto Networks and TJX Companies . Estee Lauder: The cosmetics maker on Monday morning, is releasing its fiscal fourth-quarter results, which means its guidance for the current fiscal year is likely to determine the stock’s reaction. Our expectations for the reported quarter are pretty low, and we opted to sell some Estee Lauder last month to ensure we weren’t only trimming our winners, which would leave us stuck with a bunch of underperforming stocks. We’ll be keeping a close eye on profit margins as we look for signs that management’s profit recovery plan will be effective, despite the subdued consumer environment, especially in China. Palo Alto Networks: As we said in our in-depth preview of the quarter Friday, our three focus areas — aside from sales and earnings results, of course — will be progress on its “platformization” strategy, remaining performance obligation growth, and signs that customer demand remains healthy. We continue to view cybersecurity as a crucial long-term theme to invest in. But after Palo Alto’s stock mounted a huge rally over the past two weeks, on Friday we shifted our rating on the stock to a 2. That means we’d wait for a pullback before adding to our position. TJX Companies: In addition to sales and earnings, we’ll be keeping a close eye on same-store sales performance across TJ Maxx and Marshalls, as well as the HomeGoods segment. Anything executives have to say about foot traffic and ticket size will also be of interest due to our belief that inflation-wary consumers will flock to off-price stores — and TJX owns the best of them — as they look to get the most bang for their buck. That dynamic should l ead to a successful back-to-school season for TJX . Monday, August 19 Before the bell: Estee Lauder (EL) , ZIM Integrated Shipping (ZIM) After the bell: Palo Alto Networks (PANW) , Fabrinet (FN) Tuesday, August 20 Before the bell: Lowe’s Companies (LOW), Workhorse Group (WKHS), Medtronic (MDT), Navios Maritime Partners LP (NMM), Futu Holdings (FUTU), Kingsoft Cloud Holdings (KC), Vipshop Holdings (VIPS), XPeng (XPEV), Amer Sports (AS), H World Group (HTHT), Premier (PINC), AiHuiShou International (RERE) After the bell: Dada Nexus (DADA), La-Z-Boy (LZB), Toll Brothers (TOL), Keysight Technologies (KEYS), Jack Henry & Associates (JKHY), Chemical & Mining Co. of Chile (SQM), ZTO Express (ZTO), Coty (COTY) Wednesday, August 21 2:00 p.m. ET: FOMC Minutes Before the bell: TJX Companies (TJX) , Target (TGT), Macy’s (M), Dycom Industries (DY), Analog Devices (ADI), ZEEKR Intelligent Technology Holding (ZK) After the bell: Snowflake (SNOW), Zoom Video Communications (ZM), Wolfspeed (WOLF), Synopsys (SNPS), Agilent Technologies (A), Urban Outfitters (URBN), Nordson (NDSN) Thursday, August 22 8:30 a.m. ET: Initial Jobless Claims 9:15 a.m. ET: Flash PMI 10:00 a.m. ET: Existing Home Sales Before the bell: Baidu (BIDU), OSI Systems (OSIS), Peloton Interactive (PTON), Advance Auto Parts (AAP), BJ’s Wholesale Club (BJ), Canadian Solar (CSIQ), Weibo (WB), Bilibili (BILI), NetEase (NTES), TD Bank (TD), Viking Holdings (VIK) After the bell: CAVA Group. (CAVA), Bill.com Holdings (BILL), Workday (WDAY), Intuit (INTU), Ross Stores (ROST) Friday, August 23 10:00 a.m. ET: New Home Sales Before the bell: Gold Fields (GFI) (Jim Cramer’s Charitable Trust is long *** FILL IN*** . See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Traders work the floor of the New York Stock Exchange on August 16, 2024.
Angela Weiss | AFP | Getty Images
The economic worries that pummeled stocks in early August quieted further in recent days, enabling Wall Street to turn in its best week of the year.
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