Powell’s Effect On Bonds, The S&P 500, The Nasdaq 100 And The Dollar

Since markets had been expecting the rate cut scenario for weeks and weeks, it wasn’t exactly a surprise when Federal Reserve Board Chair Jerome Powell on Friday let it be known that, indeed, that expectation had been correct. He advised Fed officials meeting in Jackson Hole, Wyoming that cuts in interest rates had a near future.

The idea, according to leading economists, is that such a move would help to stimulate their favorite topic: the economy. The latest data showed more jobless claims than had been expected and that, among other relevant data, is said to make a drop in interest rates appropriate and needed.

Stocks, Bonds and the Dollar After Jackson Hole.

The Standard & Poor’s 500’s daily price chart looks like this:

Today’s price was unable to clear Thursday’s high price and remains below the July peak. This likely means that the expectation for Powell’s “interest rate cuts soon” talk was fully priced in. That is, Wall Street money managers had already made the correct (to them) number of purchases in the stocks that they liked and did not feel compelled to add to those positions once the news was out. Note that the 50-day and the 200-day moving averages continue to trend upward.

Here is how the Nasdaq 100 daily price chart looks now:

The index heavily weighted with the big cap tech and social media stocks failed to make it up past the high of the Thursday session. Up 1.18% for the day is nice but it’s not exactly a surge to new highs or anything like that. The Nasdaq 100 is underperforming the S&P 500 now, unable to come close to the early July high prices. It continues to trade this week above both the up trending 50-day and 200-day moving averages.

The iShares 20+ Year U. S. Treasury Bond ETF daily price chart is here:

That the price today was unable to exceed the level of the early August peak is surprising since Jerome Powell gave the bond market what it’s been wanting. This is a perfect example of good news already being priced by the market. The 50-day moving average crossed above the 200-day moving average in late June and both are in uptrend mode since then.

There is one market that reflects the interest rate cut assurance with a strong rally: the iShares U. S. Real Estate ETF. Take a look at the daily price chart:

The interest rate sensitive fund invests in dividend-paying real estate investment trusts and, with Powell’s optimistic rate cut comments, buyers entered in a big way. The ETF ended the session up by 2.24% with a new all-time high and well above both 50-day and 200-day moving averages.

The Invesco U. S. Dollar ETF had a bad day:

Now showing four closes below the 200-day moving average, investors are saying that lower interest rates on U. S. Treasuries are not desirable. There is less confidence in the dollar as the bonds make gains.

No artificial intelligence was used in the writing of this post.

Additional market analysis and commentary at johnnavin.substack.com.