Wall Street Notches a Third Straight Winning Week Even as Record High Fades Into Friday Slump
The S&P 500 cleared 7,800 for the first time Thursday, then slipped Friday — but traders are increasingly betting the Fed won't raise rates next month, and that's kept the rally alive.
Wall Street closed out its third consecutive winning week Friday, the longest streak since May, even though stocks pulled back slightly from the record high notched just a day earlier. The S&P 500 touched an intraday all-time high Thursday before closing at 7,798.99, clearing the 7,800 threshold for the first time in the index's history, according to Yahoo Finance's market coverage.
Friday brought a mild reversal: the S&P 500 slipped about 0.2%, the Dow Jones Industrial Average dropped roughly 0.2%, and the Nasdaq Composite fell about 0.3% as investors turned cautious in afternoon trading. Even so, all three major indexes still finished the week higher, and the small-cap Russell 2000 bucked the Friday pullback entirely, notching its own fresh record to cap the week, according to TheStreet's market wrap.
The Fed calculus shifts
Behind the market's resilience is a rapidly changing outlook on the Federal Reserve's next move. Fears of a Fed rate hike at the September 16 policy meeting have eased sharply this week on the back of softer economic data and cooler inflation readings. According to CME Group's FedWatch tool, the probability traders assign to a September rate hike has fallen to roughly 34%, down from about 55% just a week earlier — a swing that has given investors more confidence to keep buying into records rather than brace for tighter policy.
INVESTORS TURNED CAUTIOUS IN AFTERNOON TRADING.
That caution Friday was tied in part to signs the economy's momentum may be cooling, with weaker household sentiment readings adding to a batch of recent data pointing to a slower pace of growth. Still, strategists noted that softer data cuts both ways for markets right now: it raises some growth concerns, but it also reinforces the case for the Fed to hold off on hiking, which has been the dominant force propelling stocks to records through the summer.
What's next
With the S&P 500 having now closed above 7,800 for the first time and posted three straight weeks of gains, traders will be watching upcoming inflation and employment data closely for any sign that could shift the Fed's calculus before the September meeting. A hotter-than-expected inflation print or a stronger jobs report could quickly revive rate-hike fears and test the market's recent resilience, while continued soft data would likely reinforce the rally that has carried indexes to records despite persistent geopolitical and economic uncertainty.