Jackson Hole 2018

As I wrote in mid-July, I expected the 2,800 level on the S&P 500 to act as support for the market, and it has despite being tested on several occasions over the ensuing six weeks. That support level has been pivotal as we have headed into the second half of ’18. Since the onset of the second half, all three major equity market indices have posted solid gains. Last week the S&P 500 registered an all-time intraday high as well as and an all-time record high. Additionally, the long-running bull market established a record in terms of duration.

Those gains continue to be buttressed by solid economic, employment and confidence figures. As Fed Chair Powell indicated in his speech on Friday, economic expansion continues at a healthy pace while inflation remains largely at target.

Last Friday’s speech, given by Fed Chairman Jerome Powell, provided investors with meaningful guidance for what to expect of monetary rate policy moving forward. Given the consistent evidence of sustainable economic expansion, earnings growth, income growth and low levels of jobless claims and unemployment currently present in this stage of our economic cycle, Mr. Powell indicated that continued gradual tightening was appropriate. He also addressed the critically important topic of inflation and resource utilization. Chair Powell suggested that, in effect, inflation may not be as responsive as it has historically been to resource utilization. Currently, the economy exhibits high levels of resource utilization while the rate of inflation seems likely to remain at or near the Fed’s 2% target – not higher. Fed Chair Powell indicated that asset prices are increasingly more of a focus for the Fed than broad measures of inflation. His talking points fell well within investor expectations and provided no headwinds for the broader equity market indices last Friday.

Other economic releases last week included the EIA Petroleum Status Report. For the week ending 8/17, crude inventories dropped 5.8 M barrels while gasoline and distillate inventories rose modestly by 1.2 M and 1.8 M barrels respectively. Clearly, the larger than expected draw on crude stockpiles triggered a reversal for WTI crude, which climbed $2.50/bbl from the EIA release to close out the week at $68.52/bbl.

Weekly Jobless Claims for the week ending 8/18 were 210K, once again below the Econoday Consensus. The four-week moving average is now 213.5 K. New Home Sales – Level – SAAR for July were 627K versus consensus of 649K. However, the previous month’s report was revised higher to 638K from 631K. Finally, Durable Goods for July were marginally below consensus coming in at -1.7% versus -0.8%.
This week, on Tuesday, we receive the International Trade in Goods data from the Census Bureau. On Wednesday we receive the second Q2 GDP estimate. The initial reading was 4.1%. Econoday consensus is calling for 4.0%. Personal Incomes and Outlays M/M are expected to remain unchanged from June. Otherwise, we receive Consumer Confidence and Consumer Sentiment Readings as well as a look at retail sales (advance).

On the earnings front, four companies are reporting that will highlight the busy calendar. Box (BOX) reports results after the close on Tuesday. Hewlett-Packard Enterprises (HPE) also reports after the close on Tuesday. On Wednesday, Salesforce (CRM) reports after the close, and on Thursday, Lululemon (LULU) reports, also after the closing bell.

Chart: S&P 500 (^GSPC)
SNP -SNP Real Time Price. Currency in USD
2,874.69 +17.71 (+0.62%)
At close: August 24 5:00PM EDT

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