Stocks rallied, led by tech and consumer discretionary stocks, after Fed chair Jerome Powell signaled a dovish shift at Jackson Hole. He said the central bank is open to a rate cut in September, helping to calm fears about trade tensions and soft economic data. Bond yields and the dollar declined. Core PCE, a measure of inflation the Fed watches, rose 2.9% in July, in-line with expectations but an acceleration from the prior month and the highest print since February.
Investors also got some good news on the earnings front. JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) all reported better-than-expected results, helping to lift bank stocks. And GE Vernova (GEV) soared after raising guidance and reporting strong quarterly results.
But despite the positive market tone, some trade concerns are back to the forefront after Caterpillar (CAT) and Gap (GPS) both warned about tariff-related impact on profits. And investors will be keeping an eye out for today’s $58 billion 3-year note auction, which could provide more input on demand for U.S. debt after last week’s budget passage. Market breadth remains at high levels, indicating positive sentiment across sectors. However, back-to-school and holiday shopping season is around the corner, so demand for consumer goods could be softer than expected if tariffs eat into spending.