Let's get to the big story breakdown.
Wall Street pausing after the huge rally last Friday and as Trump intensifies criticism of Fed independence stocks, giving back some of Friday's post-Jackson Hole rally.
Fetcher Powell boosted rate cut hopes with a carefully worded speech last week, saying the balance of risks appears to be shifting a signal that a weaker job market could help cool inflation.
Now markets are pricing in a higher chance of a rate cut next.
Month.
So joining me to weigh in is Michael yanking, senior market strategist at the New York Stock Exchange.
Michael, good morning.
Thank you so much for joining me.
Remy, thanks for having me back on.
Well, first and foremost, let's start out with the Fed Reserve.
Last week we saw a market rally on the heels of that post Powell statement, and usually when we're thinking about Jackson Hole, it turns out to be a snooze fest, but not the case last Friday.
And of course overnight we got some.
Headlines regarding the independence of the Fed.
So what do you make of all of this?
Yes, so I mean, you know, last week we had Fed Chair Powell's speech on Friday which was the long awaited event.
You know he did have a slightly dovish shift.
Like his language is a little bit more dovish than when we had last heard from him.
It was also the first time we'd heard from him since, you know, we had the weak jobs report, right?
So acknowledging the weakness, kind of that that we started to see with the big negative revisions and you kind of moved a step closer as we've been talking about setting the table, right, he Moved another step closer to that the September rate cut.
Now at this point we still have, you know, kind of a couple major economic data points, you know, kind of ahead of us with the jobs report next week and then inflation in two weeks, right?
So we'll have to, you know, he did kind of maintain that optionality, but you know markets seem to be kind of, you know, pretty well prepared for that September cut.
However, like his commentary wasn't all that dovish like in totality right where he kind of suggested that you know that the rate cutting cycle wouldn't be as deep as what we've seen, you know, kind of previously, right, so I think it was largely in line with you know kind of what markets had expected, you know, there was a little bit of nervousness as we approached that event that you would actually have Fed Chair Powell kind of really pushed back.
Against, you know, kind of some of the criticism that he's been taking from the White House and that didn't happen either, right?
So that was, you know, you see you saw like a little bit of a relief rally on Friday, you know, with what we're seeing kind of last night and you know kind of President Trump, you know, kind of calling for the removal or you know kind of you know firing of Fed Governor Lisa Cook, right?
Markets are largely taking that. stride at this point, there is still a lot of ambiguity in terms of whether or not he can actually do this for cause.
And interestingly enough, I was just looking at polymarket before I came on and if you look at kind of the probabilities on Polymarket, it's about a 1 in 4 chance that she's removed by September and a 1 in 3 chance that she's out by December, right?
So even those. which are not particularly liquid are suggesting that you know there's there's still there's not a clear view that she that she can be removed at this point.
Yeah, and I think there's a lot of noise out there when we think about the headlines.
So I do want to mention that we do have economic data at the end of this week and for the final week of August ahead of Labor Day.
We do have a lot to parse through.
So given the fact that Nvidia earnings are.
Coming out after the bell tomorrow, that is something we're going to pay attention to.
So when it comes to the tech sector, the AI play, what are we actually seeing here?
Yeah, so I mean there's been some, you know, a little bit of a wobble in that trade, you know, kind of over the last week.
I think part of that is coming from some of the commentary that we started to hear from Sam Maltman and some others within the industry, right?
The other piece of that, you know, kind of was.
A little bit of a rotation right that we had started to see with the with the kind of that broadening trade reshowing up we talked about two weeks ago kind of about what would kind of potentially drive some of that broadening that would, you know, that being kind of the idea that we would start to see rate cuts, right?
We started to see that you kind of you kind of play out a little bit over the last, you know, week or two, you know, kind of in terms of Nvidia, right?
I mean the idea that they're earning. are going to be solid.
They're going to have kind of pretty strong numbers, right?
Once again, the bar is set pretty high for this company where they've consistently beaten expectations by a pretty wide margin, right?
So the big question is kind of how the stock reacts, you know, kind of on the back end of of you know kind of what is expected to be kind of very, very strong earnings, you know, and we're in this period where kind of the S&P 500 and kind of major indices are right around kind of all-time highs.
You know, we've been kind of this slow grind higher, you know, and we're also, you know, in this, you know, pretty well known kind of negative, seasonally negative period for the market.
So we're going to need to see kind of how we how we move through those events.
And finally we have less than 60 seconds here, so I do want to get your levels for the S&P 500.
And also what are you looking for when it comes to the 10 year yields?
Yes, yes.
So in terms of the S&P 500, I think the first level of support, kind of first level to.
Pay attention to right around 6400.
You have the 20 day moving average which we've pretty consistently been above, you know, really since the April lows, you know that sits right below 6400 and then you have kind of last week's lows around 6350, you know, kind of to pay attention to and then a little bit of a bigger level kind of 6250 to 6300, where you have the early August lows and the 50 day moving average, right?
You know, look, the 10 year has Has held you know kind of pretty steady, you know, kind of right around these current levels, right?
So you know I don't think we're going to see kind of any sort of major move, you know, kind of, you know we're still kind of watching, you know, the curve, right?
And so you know that idea of Fed independence is causing some steepening of the curve, right, and that's kind of something to pay attention to.
OK, Michael, always great having your insights here.
Thank you so much.
Have a great holiday weekend and we'll see you back here on Tuesday.
Sounds good.
See you next week.
