The S&P 500 Rebounds for Best Week of 2024

There’s one thing we know for sure about stock price volatility. Big moves, whether up or down, tend to be clustered together.

During the last several weeks, a new cluster of volatility formed in the U.S. stock market. The S&P 500 (Index: SPX) experienced a large downward move after being triggered by a noise event that arose in Japan’s stock market. That event was followed by a week of recovery, which in turn, has been followed in the past week by large upward moves in the level of the S&P 500.

By the closing bell on the trading week ending on Friday, 16 August 2024, the index rose to 5,554.25, more than 210 points and 3.93% higher than where it closed in the previous week. The upward moves coincided with the arrival of new information suggesting the perceived risk of recession in the U.S. economy is much lower than other data signaled just a few weeks earlier.

The result was several unusually large upward moves in the level of the S&P 500, which are captured in the latest update to the dividend futures-based model’s alternative futures chart.

Assuming investors are still focusing on the distant future quarter of 2025-Q2 as they have in the last several weeks, these upward movements have put the trajectory into the upper part of the redzone forecast range we’ve added to the alternative futures chart. This forecast range runs through 1 November 2024 and is based on the assumption that investors will shift their forward looking attention toward the nearer term future of 2024-Q1 as we get closer to the end of 2024.

We’ve added this new forecast range because we’ve entered a period where we know in advance the dividend futures-based model’s projections will be affected by the echoes of the past volatility of stock prices for a prolonged period. This situation arises a result of the model’s use of historic stock prices as the base reference points from which it projects their future. When that historic data captures previous volatility in stock prices, it skews the model’s projected future for stock prices. We compensate for this echo effect by bridging across the period in which we know the past volatility of stock prices will affect the model’s raw projections, which we show on the chart using a red-shaded forecast range.

But enough about dry technical details. Here’s our summary of the past week’s market-moving headlines, which we present to document the random onset of new information that investors absorbed as they went about setting the level of stock prices during the week that was.

Monday, 12 August 2024

• Signs and portents for the U.S. economy:

• Oil prices jump on prospect of widening Middle East war shrinking supply
• Shrinking cash cushions may pinch US consumer spending, SF Fed report says

Fed minions don’t say “recession” but claim rate cuts will be needed if inflation falls:

• Fed’s Bowman: Rate cuts will be needed if inflation keeps falling
• Fed hawks and doves: The latest from US central bankers

Bigger bond market bailout developing in China:

• China’s bond market rattled as central bank squares off with bond bulls

Nasdaq, S&P, and Dow finished mixed as investors await inflation data

Tuesday, 13 August 2024

• Signs and portents for the U.S. economy:

• Oil tumbles on easing fears of wider Middle East war

• US shale companies produce more crude using fewer rigs

US producer inflation slows as pricing power diminishes

US manufacturers hit by soaring property insurance costs

Fed minions still signaling U.S. interest rate cuts are coming soon:

• Fed’s Bostic says a ‘little more data’ needed to support cutting rates

Bigger trouble, stimulus developing in China:

• China new loans hit 15-year low in July, more policy steps expected
• What is the Chinese yuan carry trade and how is it different from the yen’s?

BOJ minions to get a stern talking to:

• Japan’s parliament to hold session next week on BOJ rate hike, sources say

Nasdaq ends up 2%, S&P, Dow rise as cooling wholesale inflation feeds rate-cut views

Wednesday, 14 August 2024

• Signs and portents for the U.S. economy:

• US consumer prices increase as expected in July

• US annual consumer price increase slows to below 3% as inflation ebbs
• July CPI supports disinflation scenario for Sept ease

Brent oil holds above $80 as fears over Middle East ease

• Oil prices settle 1% lower after surprise rise in US crude stockpiles
• Slowing global jet fuel consumption adds to oil demand concern

US junk debt investors cautious of leveraged loans as economy slows

Possible US seaport strike could back up goods for months, shipping experts say

Bigger trouble, stimulus developing in China:

• No respite for Chinese officials as economy shows new signs of weakness

More central banks start cutting their domestic interest rates:

• New Zealand delivers first rate cut in over 4 years and flags more easing

S&P 500 ends up, win streak at 5; Nasdaq ekes out gain even as Alphabet weighs

• US Considers a Rare Antitrust Move: Breaking Up Google
• Dow, S&P, Nasdaq end higher as in-line consumer price inflation sets up Fed for rate cut

Thursday, 15 August 2024

• Signs and portents for the U.S. economy:

• Oil prices rise on hopes of US rate cuts boosting fuel demand
• US corporate bond spreads recover on promising economic data

Fed minions starting to get rate cut mania:

• More Fed officials line up behind September rate cut

Bigger trouble developing in China:

• China’s factory output slows, dashing speedy recovery hopes
• China’s diesel demand fell in June by most in three years, US EIA says
• China’s home-price slump deepens to new 9-year low despite stimulus

BOJ minions get data they really didn’t want to get, expected to roll over under pressure from JapanGov minions:

• Japan’s economy rebounds strongly on consumption boost, backs case for more rate hikes
• Political uncertainty may prod BOJ to pause, but not end, rate hike path

Nasdaq closes up 2%, S&P, Dow advance as growth view brightens; Walmart soars

Friday, 16 August 2024

• Signs and portents for the U.S. economy:

• Oil falls more than $2, set for weekly decline on China worries
• Hurricane Beryl, excess inventory pressure US single-family homebuilding

Fed minions claim they don’t want to tighten monetary policy longer than they need to:

• Fed’s Goolsbee: Don’t want to tighten longer than necessary – NPR

Bigger trouble, stimulus developing in China:

• China’s spending slump weighs as e-commerce giant Alibaba misses estimates
• China’s faltering growth revives cash vouchers talk

Central banks signaling more rate cuts to come:

• NZ central bank chief flags two mores cuts by Christmas, more in 2025

Dow, S&P, Nasdaq finish in the green, mark strongest week so far in 2024

• Wall St wraps up best week of the year as recession fears fade

The CME Group’s FedWatch Tool continues to anticipate the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 18 September (2024-Q3). On that date, the Fed is expected to start a series of 0.25% rate cuts that will occur at six-week intervals well into 2025.

The Atlanta Fed’s GDPNow tool‘s projection of the real GDP growth rate for the current quarter of 2024-Q3 dropped to +2.0% from its forecast of +2.9% growth a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull dancing to celebrate the best week for the S&P 500 in 2024″.