As the week begins, Wall Street is watching consumer updates and Federal Reserve policies closely, with inventory levels sitting below record highs. The S&P 500 has remained almost unchanged, maintaining a very narrow daily range — the tightest this year. Interestingly, the overall sentiment appeared a bit stronger beneath the surface, with more stocks seeing gains on Monday, even as the equally weighted S&P 500 just edged into positive territory. Consumer discretionary and industrial sectors are proving resilient, influencing the broader market positively. This lack of significant macroeconomic news and the dominance of larger indexes suggest the market is lifting even some of the underperformers from 2025.
All ten S&P 500 stocks that have increased since the start of the year are showing average returns above two percent, including notable growth stocks like Trade Desk and Deckers Outdoors, alongside some healthcare firms facing challenges. In contrast, some prominent AI stocks faced pressure, likely due to mixed signals regarding the durability and returns of AI capital expenditures. For instance, Meta platforms, a leading name in the S&P 500, saw a decline of 2.2%. This drop might have been worsened by OpenAI founder Sam Altman hinting that the current AI investment climate feels slightly less optimistic.
Further insights into corporate earnings highlight how significantly profits exceeded expectations in the second quarter. Goldman Sachs pointed out that estimates were notably revised down earlier in the year, reflecting a shift in outlook. The gross profit for the S&P 500 was initially pegged at $67 but dropped to about $62.50, making the blockbuster report for the quarter rest at $66.50.
Looking ahead to the Fed’s Jackson Hole Symposium later this week, there’s an air of uncertainty about how Chair Jay Powell will address the possibility of a rate cut in September. In June, officials had hinted at two more cuts by year-end, but the weak July job report complicates matters. Powell might be reluctant to take a firm stance since more economic data, including job figures and inflation, will surface before the September meeting. Current stock valuations appear balanced, credit spreads are strong, volatility is low, and major economic indexes are holding steady. But it begs the question: is the market genuinely strong enough to support a forthcoming rate cut?
