S&P 500 Investor Focus Shifts Forward to 2024-Q4

The S&P 500 (Index: SPX) lost a half percent of its value from its previous week’s close during the Memorial Day holiday-shortened week. The index ended an exciting day of trading on Friday, 31 May 2024 at 5,277.51.

In doing so, the trajectory of the index has aligned with the dividend futures-based model projection of where the index would be provided investors shifted their forward-looking focus toward 2024-Q4. The shift in focus comes as expectations of a September 2024 rate cut by the Federal Reserve solidified somewhat following the latest inflation data.

Should that expectation hold, this rate cut would be announced on 18 September 2024, just two days before the effective end of 2024-Q3 with the expiration of the dividend futures contract for that quarter. 2024-Q4 effectively begins on Saturday, 21 September 2024.

At least, that’s our initial assessment from examining the latest update of the alternative futures chart. Here’s what that chart looks like:

Here’s how the market moving news headlines of the week played out.

Tuesday, 28 May 2024

• Signs and portents for the U.S. economy:

• Oil up on OPEC+ meeting, summer driving season and weaker US dollar

Fed minions thinking they should say more and wait more:

• Fed’s Mester: Fed statements would benefit from some added length
• Fed’s Bowman: Would have backed waiting to taper balance sheet run-off
• Fed’s Kashkari wants significant progress on inflation before rate cuts

Bigger stimulus developing in China:

• China sets up third fund with $47.5 bln to boost semiconductor sector

BOJ minions seeing mixed inflation numbers:

• Japan’s business service prices rise at fastest annual pace since March 2015
• BOJ’s underlying inflation measures in April all fall below 2%

Nasdaq closes above 17,000; S&P 500 slightly higher, Dow down

• Stocks end mixed, yields up after weak note auctions; Nasdaq scales 17K for the first time

Wednesday, 29 May 2024

• Signs and portents for the U.S. economy:

• US firms grow more pessimistic on economic outlook, Fed survey shows
• U.S. bank profits jump 79.5% as large firms shake off failed bank costs
• Oil prices ease on US gasoline demand worries, economic data

BOJ minions thinking about fixing falling yen with rate hike:

• BOJ policymaker hints at rate hike if yen’s impact on inflation is big

Bigger trouble developing in Eurozone, but ECB minions expected to deliver on rate cuts:

• German inflation higher than expected ahead of ECB rates decision
• June ECB rate cut a done deal, majority expects cuts in Sept, Dec too: Reuters poll

Dow sheds more than 400 points, Nasdaq retreats further from 17K, S&P declines

• Wall Street ends lower amid rate concerns, higher bond yields

Thursday, 30 May 2024

• Signs and portents for the U.S. economy:

• Oil prices steady before stocks and inflation data, OPEC+ meeting
• US home prices to rise 5% this year, more modestly next
• US pending home sales suffer largest drop in three years

Fed officials see inflation falling, signal no rush to cut rates

• Fed’s Logan: inflation heading to 2%, too soon to cut rates
• Fed’s Goolsbee says inflation could still fall without rising unemployment

Weak growth signs developing in China:

• China’s May factory activity likely expanded at steady pace, recovery still fragile: Reuters poll

BOJ minions starting to think they may need to really fix problems:

• Yen’s relentless slide revives Japan’s interest in structural reforms

Nasdaq falls 1%; Salesforce shares weigh on tech

• Salesforce plummets as weak forecast sparks concerns of AI competition

Friday, 31 May 2024

• Signs and portents for the U.S. economy:

• US inflation up moderately in April, consumer spending weakens

• Price cuts, weaker spending may boost Fed’s faith in inflation outlook

Oil settles down ahead of OPEC+ meeting, posts weekly loss

Fed minions expected to cut rates in September, may soon have more problems:

• Fed seen more likely to cut rates in Sept after PCE data
• The Fed Might Soon Have to Worry About More Than Just Inflation

Bigger trouble developing in China:

• China’s factory activity unexpectedly dips as property pain persists

BOJ minions starting to think they may need to do something about inflation in Japan:

• BOJ panelist calls for steady rate hikes, warns of inflation risk

ECB minions thinking about how much to cut interest rates in face of Eurozone inflation:

• ECB needs series of rate cuts to reach neutral stance, Panetta says
• Euro zone inflation rises in fresh signal for ECB caution

Nasdaq, S&P, and Dow finished higher after late afternoon rally

• S&P 500 marks a loss for holiday-shortened week, but finishes May with a win
• Nvidia set to overtake Apple as world’s second-most valuable company
• ‘Bothersome’ rebound in US yields casts shadow on stocks at record highs

The CME Group’s FedWatch Tool continued holding steady in anticipating the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 18 September (2024-Q3). The tool anticipates the Fed will start a series of 0.25% rate cuts on that date that will proceed into 2025 at 18 week intervals.

The Atlanta Fed’s GDPNow tool‘s forecast of annualized real GDP growth rate during 2024-Q2 dropped to +2.7% from the +3.5% growth projected a week earlier. Meanwhile, the BEA’s estimate of annualized real GDP growth in the first quarter of 2024 was revised down from +1.6% to +1.3%. The BEA will revise its official estimate for 2024-Q1 real GDP growth again on 27 June 2024.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of train tracks going out to the horizon with the characters ’2024-Q4′ floating above them“.