S&P 500 Climbs in August: Inflation Data Boosts Market Confidence, Dell and Intel Stocks Surge
In a noteworthy turn of events, the S&P 500 closed higher on Friday, wrapping up August with a robust four-month winning streak. The rebound in the stock market followed a major selloff earlier this month, propelled by easing economic concerns.
As of 16:00 p.m. ET (20:00 GMT), the S&P 500 surged by 0.04%, the Nasdaq climbed 1%, and the Dow Jones Industrial Average rose by 228 points, or 0.63%. The S&P 500 posted a 2% gain for August, a significant recovery following its biggest loss in nearly two years on August 5th, triggered by a weaker-than-expected July jobs report. However, recession fears were allayed by a stream of positive labor market data.
July Inflation Data Suggests Rate Cuts, But Bigger Cuts Unlikely
The core Personal Consumption Expenditures (PCE) index, the Federal Reserve's preferred inflation gauge, rose by 2.6% in July on an annual basis, slightly below the 2.7% estimate. On a monthly basis, it increased by 0.2%.
This data reinforced expectations for the Federal Reserve to cut rates as soon as next month. Traders are now pricing in a 68% chance for a 25 basis point cut, but the likelihood of a 50 basis point cut has decreased to 30%, compared to 37% last week.
"This reading should provide Chair Powell and the broader FOMC with continued comfort to proceed with rate cuts beginning at September's meeting," Macquarie noted in a memo.
Tech Giants and Retailers: Mixed Fortunes
Dell's Impressive Performance
Dell Technologies (NYSE: DELL) saw its stock rise over 4% after the company raised its annual forecasts. This boost follows better-than-expected quarterly results driven by record AI server revenue. UBS highlighted that Dell's strong AI revenue, orders, and ISG margins in the quarter validate that previous issues were transitory and not indicative of ongoing margin softness in its AI server business.
Ulta Beauty's Decline
Ulta Beauty (NASDAQ: ULTA) experienced a 4% drop in its stock price after it lowered its annual sales and profit forecasts. The beauty retailer is facing declining demand for higher-priced cosmetics and fragrances at its stores.
Lululemon's Mixed Results
Lululemon Athletica (NASDAQ: LULU) relinquished most of its gains after the athletic apparel retailer reduced its annual sales and profit forecasts, citing slowing demand in North America.
Intel's Strategic Moves
Intel Corporation (NASDAQ: INTC) saw its stock jump over 9% following a Bloomberg report that the tech giant is considering spinning off its foundry business and scrapping plans for new factories. Wedbush noted that a potential spinoff would create immediate value for shareholders as mounting losses in the foundry business have been dragging down Intel's valuation.
Breaking It Down: What This Means for You
Let’s break this down so that everyone can understand. The stock market is like a big auction where people buy and sell pieces of companies. When more people feel good about the economy, they buy more stocks, which makes prices go up. This month, people were worried at first, but then they got good news about jobs and inflation. This made them feel better, and they started buying more stocks again, making the market go up.
For you, this means your investments, like in your retirement account, might be doing better. If you have stocks in companies like Dell or Intel, you might have seen some nice gains. But if you have stocks in companies like Ulta or Lululemon, you might have noticed some losses.
Understanding these trends can help you make better decisions about where to put your money. If the economy keeps getting better and the Fed cuts rates, stocks might keep going up. But always remember, the market can be unpredictable, so it’s good to stay informed and possibly consult with an investment advisor.
Contributors: Peter Nurse, Ambar Warrick
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By following this analysis, even the most novice investor can grasp the current market trends and understand how these developments could impact their financial well-being.