US Markets

Pre-Markets Indicate Solid Start to the Week: Will the Rally Last?

Stocks futures jumped sharply, pointing at a strong opening for the last week of August. Today's solid build-up in pre-market is based on last week’s impressive performance wherein the S&P 500 recorded a new all-time high, erasing all coronavirus-led losses and iPhone maker Apple Inc. AAPL became the first publicly traded U.S. company with a market cap of more than $2 trillion.

Sentiments of market participants were further boosted as the FDA granted emergency authorization of convalescent plasma to treat hospitalized Covid-19 patients on Aug 23. Despite the lack of sufficient clinical trial data, the FDA believes that convalescent plasma may be effective in treating Covid-19 patients based on a comparative benefit-risk analysis. Buoyed by the news, shares of reopening stocks like casinos and airlines increased in pre-market trading aside from tech stocks.

Moreover the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 5.7%, 3.9% and 5.3%, respectively, month to date, despite the fact that the market has remained rather soft historically in August. If this momentum lasts, Wall Street will continue its rally for the fifth consecutive month. The rally is being supported by better-than-expected economic data, the latest being the IHS Markit Flash PMI which showed that both manufacturing and services activities have surged in August.

Nevertheless, the market is not completely out of the woods. Although new records have been set by the S&P 500, more than half of the companies listed on it have lost so far this year. The current economic condition still requires the second round of fiscal stimulus. However, Congress failed to reach an amicable solution regarding the size and scope of the stimulus.

Lack of fiscal stimulus has made the Fed's decisions more vital to market participants. The Fed will hold its annual Jackson Hole symposium from Aug 27. This year, the event will be virtual due to the ongoing pandemic. Investors will try to gauge how long the central bank will continue with its low interest rate and ultra-accommodative monetary policies. Investors will closely watch if the Fed Chairman hints at any adjustment in policy variables and inflation-targeting measures.

Meanwhile, we are in the last leg of the second-quarter earnings season and more than 25 large-cap companies are slated to release their results this week. These companies are mostly from the technology and retail sectors. Notable among them are, inc. CRM, Autodesk Inc. ADSK, Dell Technologies Inc. DELL, HP Inc. HPQ, Best Buy Co. Inc. BBY, Dollar General Corp. DG and Ulta Beauty Inc. ULTA.  

Finally, apart from weekly jobless claims, a spate of other major economic data will also be released this week. These include Case-Shiller home  prices, new home sales, pending home sales, consumer confidence, durable goods orders, the second estimate of second-quarter GDP, the final consumer sentiment data, consumer spending, PCE and core PCE inflation. Investors will closely monitor these important data to get a glimpse of the economy's health.

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