Breadth in Markets Broadens Out

This past week, we watched as the trading for August wrapped up, finishing the month in the green by roughly 2.3%, which is quite a strong return given how the month’s trading began. As the market rallied and recovered this month, the headline S&P 500 index has seemingly hit a temporary wall around the 5600 level, not yet being able to push much above this threshold. As the markets began trading higher off of the early-August lows, they were boosted by many segments of the market. This broad participation is evidenced by the Equal Weight S&P 500 charging on to a series of new 52-Week Highs last week. Additionally, the NYSE Advance-Decline Index made a new yearly high as well, indicating that more NYSE listed stocks are rising than are falling. Even as market leadership by the mega-cap Technology stocks has slowed, other areas of the market are igniting and beginning to take over this role. Now that nearly all significant Q2 earnings are reported and behind us, the market is in need of a new catalyst to make a move higher. Whether this comes in the form of the upcoming Jobs report or even the next Fed meeting slated for mid-September, the markets are likely going to be in a bit of a holding pattern until it gets the catalyst it needs. Furthermore, as we get into September there is some ‘seasonality’ that we will be faced with as September is historically the worst month of the year for market performance. This rocky historical performance is generally coupled with elevated market volatility as well. Now that they have received confirmation from Fed Chair Powell that the FOMC intends to cut rates at their upcoming meeting, investors are squarely focusing on this, leaving only the size of the cut up for debate. It is our opinion that between now and then the markets will likely endure some choppy trading until the official rate decision is announced. As long as macroeconomic data remains solid between now and then, once this decision is announced, we expect this to be the catalyst that will push markets on to new highs.

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Key Events to Watch this Week

U.S. August Jobs Report
ADP Employment Report
AVGO Q2 Earnings

This upcoming week will be shortened for traders as the market is closed on Monday in observance of Labor Day. Even with the shortened week, there are still plenty of events that will draw our team’s attention. As the Fed’s focus has pivoted from solely on inflation to now being more focused on the labor market and potential downside risks, this upcoming week brings some key data. This week we are expected to get two major labor reports. The first of which will be Thursday’s ADP private sector employment report. However, all eyes will be on the more significant report due on Friday, the BLS’s U.S. August Jobs report. This report will be highly anticipated because it is a crucial piece of data that will heavily influence the Fed’s upcoming rate decision and will perhaps serve as the deciding factor between a cut of 25 basis points or 50 basis points. While investors will be tuned in later in the week for this labor market data, there is one major earnings print that we are looking out for this week too. On the heels of last week’s attention grabbing Nvidia earnings report, this week Broadcom Inc., another major semiconductor firm, will report their Q2 results. Reporting after the closing bell on Thursday, AVGO is expected to post YoY Q2 earnings growth of 14.3%. Enjoy the holiday weekend everyone!

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.

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