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Why Powell’s Speech Caused a Rally

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What’s in Today’s Report:

  • Why Powell’s Speech Caused a Rally
  • Weekly Market Preview:  Will Data Keep the Goldilocks Rally Going?
  • Weekly Economic Cheat Sheet:  Jobs Week (This is the Most Important Jobs Report in Months)

Futures are slightly higher mostly on momentum from Friday’s “dovish Powell” rally, following a quiet weekend.

Fed Chair Powell’s speech on Friday was taken as slightly dovish and that drove the rally in U.S. stocks and it’s carried over globally as we start a new week (all the major foreign markets we monitor are modestly positive).

Economic data was sparse as Euro Zone Economic Sentiment slightly missed expectations (117.5 vs. (E) 118) although that’s not moving markets.

Today there is one economic report, Pending Home Sales (E: 0.3%), but that shouldn’t’ move markets.  Instead, as long as the dual tailwinds of 1) Receding COVID cases in the U.S. and 2) A dovish Fed remain, stocks should be buoyant (although if either idea is contradicted expect some give back of last week’s rally).  Finally, keep in mind this is one of the most popular vacation weeks of the year due to the looming Labor Day weekend, so don’t be surprised by low volumes and some added volatility.

Is the Pullback Over? (Technical Levels to Watch)

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What’s in Today’s Report:

  • If the Selloff Continues, Where Is Technical Support?

Stock futures are wavering between gains and losses this morning while international markets were mixed overnight amid a continued rise in COVID-19 cases clouding the outlook for the global economic recovery.

There were no market-moving economic reports overnight however new coronavirus cases topped 50,000 in the U.S. yesterday, a more than one-month high, suggesting the resurgence in the outbreak may not be limited to Europe.

Today, there is one economic report to watch: Existing Home Sales (E: 5.965M) and the Chicago Fed’s Evans will speak at 10:00 a.m. ET but the market’s main focus will be Chair Powell’s testimony before congress, alongside Treasury Secretary Mnuchin, beginning at 10:30 a.m. ET.

Powell and Mnuchin are expected to reiterate concerns about the fragile state of the economic recovery and as long as they remain extremely dovish/accommodative, it should help markets begin to stabilize following the recent, near-10% pullback in the S&P 500.