Next week may prove crucial in assessing whether stocks, currently at record highs, can maintain their upward trajectory. The Dow Jones Industrial Average reached 42,000 for the first time, while the S&P 500 surpassed the 5,700 mark following the Federal Reserve’s decision to reduce interest rates by half a percentage point. The upcoming trading days are expected to be pivotal, as investors prepare for October, a historically volatile month for equities, further intensified by the impending U.S. presidential election.
Katie Stockton, founder of Fairlead Strategies, commented on the significance of the current period, noting the potential impact on market trends. The Dow, S&P 500, and Nasdaq Composite all closed the week over 1% higher. Stockton is closely monitoring the S&P 500, now above the 5,670 level, to see if the breakout can continue, despite some indicators suggesting potential exhaustion. Confirmation of this breakout is critical, according to Stockton, as a false breakout could have negative implications. If confirmed, the S&P 500 could see a 4% rise to around 5,935 over the next three to eight weeks. A confirmation might also mitigate the expected October correction, whereas a breakdown could lead to a more significant pullback.
Stockton anticipates a trading range environment for stocks over the next nine months, with the broader index currently around the 5,700 mark. Upcoming economic reports are expected to show softer readings, potentially testing stock advances. September’s consumer confidence is predicted to decline slightly, and durable goods orders for August are expected to drop by 2.9% following a 9.8% increase in July.
Sam Stovall, chief investment strategist at CFRA Research, suggests that the bulk of upcoming economic reports will reflect weakness, which might justify the recent rate cut. On the inflation front, the August personal consumption expenditure (PCE) price index, due Friday, is expected to show continued reduction in pricing pressures, confirming the Fed’s shift in focus towards employment. Fed Governor Christopher Waller supports this view, linking the trend in inflation reduction to his support for the rate cut. Fed Chair Jerome Powell noted that PCE is anticipated to be up 2.2%, a decrease from the previous month’s 2.5%.
The following is the schedule for next week (all times ET):
Monday, Sept. 23
- 8:30 a.m. Chicago Fed National Activity Index (August)
- 9:45 a.m. PMI Composite preliminary (September)
- 9:45 a.m. Markit PMI Manufacturing preliminary (September)
- 9:45 a.m. Markit PMI Services preliminary (September)
Tuesday, Sept. 24
- 9 a.m. FHFA Home Price Index (July)
- 9 a.m. S&P/Case-Shiller comp.20 HPI (July)
- 10 a.m. Consumer Confidence (September)
- 10 a.m. Richmond Fed Index (September)
- Earnings: AutoZone
Wednesday, Sept. 25
- 10 a.m. New Home Sales (August)
- Earnings: Micron Technology
Thursday, Sept. 26
- 8:30 a.m. Continuing Jobless Claims (9/14)
- 8:30 a.m. Durable Orders ex-Transportation (August)
- 8:30 a.m. GDP (Q2)
- 8:30 a.m. Initial Claims (9/21)
- 10 a.m. Pending Home Sales Index (August)
- 11 a.m. Kansas City Fed Manufacturing Index (September)
- Earnings: Costco Wholesale, CarMax
Friday, Sept. 27
- 8:30 a.m. PCE Deflator (August)
- 8:30 a.m. Core PCE Deflator (August)
- 8:30 a.m. Personal Consumption Expenditure (August)
- 8:30 a.m. Personal Income (August)
- 8:30 a.m. Wholesale Inventories preliminary (August)
- 10 a.m. Michigan Sentiment final (September)
This week’s developments will likely provide further direction for the stock market in the face of anticipated economic data and continued adjustments in investor sentiment.
