Stock futures are little changed following back-to-back winning weeks: Live updates

U.S. stock futures were largely unchanged after Wall Street's second consecutive weekly gain, fueled by strong earnings beats, with 82% of S&P 500 companies surpassing expectations, and investor anticipation of Federal Reserve rate cuts, pricing an 85% likelihood for September. The market's attention now shifts to the Jackson Hole symposium for further monetary policy guidance and upcoming earnings reports from major retailers, as some analysts question prevailing concerns about U.S. consumer weakness given recent market performance and consumer discretionary strength.

Analysis

The market is exhibiting a cautiously optimistic stance, with stock futures trading flat after a second consecutive week of gains for major indices, including a 1.7% rise in the Dow. This recent momentum, which has seen the S&P 500 and Nasdaq gain in four of the last five weeks, is primarily fueled by two factors: strong corporate earnings and expectations of monetary easing. According to FactSet, with 92% of S&P 500 companies having reported, an impressive 82% have surpassed Wall Street's earnings expectations. Concurrently, investor sentiment is buoyed by the prospect of Fed intervention, with Fed funds futures pricing in an 85% probability of a rate cut in September. This has disproportionately benefited small-cap stocks, which jumped over 3% last week. Notably, the S&P 500 Equal Weight Consumer Discretionary index reaching an all-time high challenges the narrative of a weakening consumer. The market's immediate focus now shifts to the Federal Reserve's Jackson Hole symposium for guidance on the path of interest rates and to upcoming earnings reports from key retailers like Home Depot, Walmart, and Target, which will serve as a crucial barometer for consumer health.

Key Decisions for Investors

• Given that an 85% probability of a September rate cut is already priced in, investors should monitor the Jackson Hole symposium for any hawkish signals that could challenge this consensus and trigger a market pullback.
• Scrutinize the upcoming earnings reports and forward guidance from major retailers like Walmart (WMT) and Target (TGT) for direct evidence of consumer spending trends, as this will be critical in either validating or refuting the market's current optimism.
• Consider the outperformance of small-cap stocks and the S&P 500 Equal Weight Consumer Discretionary index (RSPD) as signs of broadening market strength, but remain aware that this rally is heavily dependent on the anticipated dovish pivot from the Federal Reserve.