Futures dip, Jackson Hole, retail earnings and crypto pullback
Stock futures are starting a bit in the red this morning 📉. Dow futures are down about 0.2% (roughly -92 points), with S&P 500 and Nasdaq futures off ~0.1%. This dip comes after a strong run last week: the major indexes all notched a second straight week of gains, with the S&P 500 and Nasdaq even hitting new all-time highs (the Dow is just a hair shy of its record as well). It seems like a healthy breather after the recent rally fueled by hopes of lower interest rates.
Small-cap stocks really shined in last week’s rally, jumping over 3% 🚀 – outpacing their large-cap peers. That’s a classic “risk-on” signal, likely driven by bets that the Fed will start cutting rates sooner than later. Cheaper money tends to help smaller companies, so investors were piling in. I find it encouraging because it shows broad participation in the market’s surge, not just the mega-caps.
Another bullish sign: the S&P 500 Equal Weight Consumer Discretionary index just hit an all-time high 📈. To me, that hints that tariff-driven economic fears might be overblown and the U.S. consumer is holding up better than the headlines suggest. The market’s message has been quite upbeat lately – it makes me wonder if the conventional wisdom about a weakening consumer and looming stagflation is missing the mark. (Shout-out to Ross Mayfield of Baird for highlighting this in his recent note, which got me thinking along these lines.)
Last week’s inflation data added to the optimism. We saw a cooler-than-expected CPI report on Tuesday (a relief 😌 showing inflation may be cooling), and then a hotter PPI reading on Thursday that the market basically shrugged off. The fact that investors ignored an uptick in producer prices tells me they’re focusing on the bigger picture – perhaps believing that overall inflation is on a downward trajectory or that the Fed will cut rates soon enough to counter any lingering price pressures. In short, the market seems confident the inflation dragon is being tamed.
Now, all eyes are on the Fed this week 🏦. It’s the annual Jackson Hole economic symposium in Wyoming, and Fed Chair Jerome Powell is speaking on Friday. I’ll be watching his speech very closely for clues about the future path of interest rates. Markets are extremely confident about rate cuts coming down the pike – in fact, Fed funds futures are pricing in ~85% odds of a rate cut at the Fed’s next meeting in September. Even the political folks are chiming in: U.S. Treasury Secretary Scott Bessent suggested last week that the Fed should cut rates by half a percentage point at the September meeting. 😮 That kind of pressure on the Fed is unusual! I expect Powell to carefully defend the Fed’s independence and not commit to anything too drastic. But make no mistake, any hint of dovishness (or conversely, any hawkish pushback) in Powell’s remarks could send ripples through markets. This Powell speech is arguably the main event of the week for investors.
Meanwhile, we’re also heading into the tail end of earnings season, and retail giants are taking centre stage 🛒. A slew of big retailers report results this week, giving us a read on the all-important U.S. consumer. Home Depot ($HD) kicks things off on Tuesday, then we’ll hear from Lowe’s ($LOW), Target ($TGT), and TJX Companies ($TJX) on Wednesday, followed by Walmart ($WMT) and Ross Stores ($ROST) on Thursday. These reports will shed light on consumer spending patterns and how companies are coping with things like inflation and any remaining tariff impacts. (Many retailers have fiscal years ending in January, so they report later in the summer – now it’s their turn in the spotlight.) I’m particularly curious about the home improvement sector with $HD and $LOW – will higher interest rates and housing slowdowns dent their sales, or is DIY spending still strong? Also on the earnings radar is Palo Alto Networks ($PANW), reporting today – which should give insight into the cybersecurity space, a sector high-net-worth folks often watch closely.
Overall, this earnings season has been surprisingly positive 📊. About 92% of S&P 500 companies have reported so far, and roughly 82% of them beat Wall Street’s expectations (per FactSet). That’s an impressive hit rate! Despite all the recession chatter and cost pressures earlier in the year, corporate America by and large outperformed the estimates. It’s one big reason stocks have been able to climb a wall of worry. Better-than-expected earnings provide a solid fundamental backstop for the market’s recent rally – it’s a lot easier to be bullish when companies are delivering good results.
Turning to crypto, I have to mention #Bitcoin’s milestone. Bitcoin surged to a record high above $124,000 last week 🔥, buoyed by the same forces lifting equities – optimism about interest rate cuts and a weaker dollar. (Lower rates tend to make riskier assets like stocks and crypto more attractive relative to bonds, and can weaken the dollar, which often boosts crypto prices.) However, we’ve seen a bit of a pullback since then. BTC is now around $115,000, down a few percent in the past 24 hours and about 7% off that peak.
Why the retreat? 📉 It seems some of the exuberance cooled off due to macro signals. Late last week, a hotter-than-expected wholesale inflation report (Producer Prices) poured a little cold water on the “Fed is definitely cutting rates soon” narrative. On top of that, Treasury Secretary Bessent commented that the U.S. government doesn’t plan to acquire more crypto for its reserves – a reminder that policymakers aren’t diving headlong into Bitcoin. Those factors combined took a bit of the wind out of crypto’s sails. In short, some of last week’s optimism faded, and traders are locking in profits, which is not too surprising after such a big run.
It’s not just Bitcoin; altcoins are feeling the pain too. Ether ($ETH), XRP ($XRP), Solana ($SOL), and even memecoin Dogecoin ($DOGE) have all slumped about 5–6% over the past day. Volatility comes with the territory in crypto, especially as traders recalibrate their expectations around Fed policy. My take: these short-term swings are a stark contrast to the bigger picture 📈. We continue to see rising institutional adoption of crypto and increasingly sophisticated corporate strategies involving digital assets (as many market analysts, like Antonio Di Giacomo at XS, have pointed out). In other words, while crypto prices might whipsaw on weekly macro news, the long-term trend – with more players investing in and utilising crypto – still looks promising to me. I remain optimistic about the trajectory of the crypto market in the long run, even if we’ll have to stomach some bumps along the way.
On the economic data front, there are a few key reports that could create talking points 🏠📊. We’ll get a read on the housing market with July housing starts data on Tuesday and existing-home sales on Thursday. Housing has been in a bit of a slump due to high mortgage rates, so I’m watching to see if there’s any sign of a turnaround or if things are still in the doldrums. (The NAHB homebuilder sentiment index out later today is expected to tick up to around 34 from 33, but remember, anything below 50 means builders remain pessimistic.) Then on Thursday, we also get the PMI (Purchasing Managers’ Index) surveys for August – covering manufacturing and services activity. These will give an up-to-date snapshot of how the economy is doing this month. The forecast is that manufacturing PMI will come in just under 50 (still slightly in contraction) and services PMI in the low 50s (modest expansion). If there’s a big surprise in either direction, it could sway sentiment a bit. Still, to be frank, I suspect the Fed’s messaging and those heavyweight earnings reports will overshadow these data points for markets. They’re more like background context for the overall economic picture.
All told, it’s a packed week ahead with plenty of potential market movers. The big question on everyone’s mind: Will Powell hint at a rate cut in Jackson Hole, or stay cautious and noncommittal? 🤔 That answer could very well shape the market’s next big move. I’m maintaining a cautiously optimistic stance – encouraged by the market’s momentum and solid earnings, but staying nimble in case we get any curveballs. Either way, I’ll keep you posted as it all unfolds.
Stay tuned, and stay savvy out there! 💪📈
Antonio Santiago
