A feature-filled day

The winning streaks for the S&P 500 and Nasdaq Composite came to an end on Tuesday, proving that eight in a row was indeed enough for market participants. Those streaks ended on light volume, though, proving that there wasn't a lot of conviction behind the selling interest that had the major indices in negative territory by the close.

The lackluster participation was attributed to vacation schedules, a relative lack of market-moving news, and a wait-and-see stance in front of some key happenings today.

Included in the happenings are earnings reports from retailers Target (TGT), Macy's (M), and TJX Cos. (TJX). Each retailer topped quarterly earnings expectations, but that hasn't translated into similar responses for each of the stocks.

Target is surging 16% in pre-market action after raising its full-year earnings outlook; TJX is up 5% after raising its full-year comparable sales guidance; and M is down 10% after tempering its full-year sales and comparable sales guidance.

The takeaway from the reports is that consumers are still spending, yet they are leaning into value-based offerings. 

The move in Target in particular has been uplifting for the equity futures market along with lingering rate cut optimism. The latter has been a key feature of the stock market's rebound run in addition to the belief that the U.S. economy can avoid a hard landing.

Currently, the S&P 500 futures are up 11 points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 30 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are up 67 points and are trading 0.2% above fair value.

In the coming hours and days, market participants will have more insight on both the economic view and the rate cut view. Today also features the release of revisions to nonfarm payrolls for April 2023-March 2024 at 10:00 a.m. ET followed by the release of the minutes fort the July 30-31 FOMC meeting at 2:00 p.m. ET.

Previews have suggested the payroll revisions are likely to show far fewer jobs were created than previously reported; however, since preliminary job growth was still quite strong over the 12-month period, any downward revisions are unlikely to suggest the labor market was downright weak. On the contrary, the revisions are expected to convey nonfarm payroll growth that was still solid if not as robust as first reported.

The FOMC Minutes, meanwhile, are expected to convey a sense among participants that the time to start discussing a possible rate cut has drawn near given the improvement in inflation and signs of softening in the labor market. Still, with Fed Chair Powell delivering a speech on Friday at the Jackson Hole Economic Symposium about the economic outlook, it is quite possible that the minutes for the July meeting won't pack market-moving punch today.

Everyone is waiting on Mr. Powell's speech, nurturing an expectation that he will intimate a rate cut is likely at the September FOMC meeting. The Treasury market, which will digest a $16 billion 20-yr bond auction today (results at 1:00 p.m. ET), has certainly been thinking as much. The 2-yr note yield, which is sensitive to changes in the fed funds rate, is down one basis point today to 3.99%, but down seven basis points for the week and 28 basis points for the month.

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Originally Posted August 21, 2024 – A feature-filled day