The Dow Jones Industrial Average (with its slight gain last Friday) has now risen eight days in a row. The market has positive momentum based on a more constructive tone surrounding the trade negotiations between China and the U.S., as well as monetary stimulus from the European Central Bank, and rising Treasury yields here, which indicate an easing of recession fears. So with good news surrounding these big picture items, the major stock market averages posted respectable gains last week. The Dow Jones Industrial Average rose 1.6%, the NASDAQ Composite added .9%, and the Standard & Poor’s 500 Index gained 1%.
Looking away from the rearview mirror and to the week ahead – the markets are mostly expecting the Federal Reserve to cut interest rates on Wednesday. According to the CME FedWatch Tool there is approximately a 70% chance for a ¼ point rate cut. What is more in question, is the commentary the Fed will provide, as it runs the risk of spooking the market if it does not signal there will be more rate cuts to come (as some committee members do not believe further cuts are justified). Also, we’ll get a couple notable earnings reports this week – with economic bellwether FedEx, and packaged food company General Mills scheduled to report – so we’ll get at least a little taste of earnings numbers before the next earning season begins in a few weeks.
Additionally, a batch of economic data will be released this week, including numbers on Industrial Production, Housing Starts, Existing Home Sales, and Leading Indicators. Before we get to those items however, the market is opening slightly lower this morning following an attack on Saudi Arabian oil production facilities. The price of crude oil is up over 10% right now, and the market is worried this jump in oil prices could hinder worldwide economic growth, so it will be a challenge for the Dow to make it “nine in a row”. The market has a full plate in front of it this week with a lot of moving parts, so don’t be surprised if we see an extra layer of volatility.
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All the best – Southport Station Financial Management, LLC