Markets Show Resilience as AI Momentum Outweighs Macro Headwinds 

Major U.S. stocks ended the last full week of trading in August modestly higher. Strong AI company earnings boosted tech shares, while the war with Iran, persistent inflation and a more hawkish Federal Reserve dampened investor enthusiasm for risk. Federal Reserve Chair Kevin Warsh, in his speech at the Jackson Hole Summit, noted that while inflation numbers had been better than expected lately, recent data was not enough to demonstrate sufficient improvement in overall price pressures to warrant softening of the Fed’s current monetary policy. Communication Services, Financials, Information Technology, Consumer Discretionary and Materials led the market sectors. Crude oil prices dipped lower as improving transport through the Strait of Hormuz reduced perceived supply risk. 

Consumer Spending and Income Rise as Inflation Moderates 

According to the latest data from the Bureau of Economic Analysis, the Personal Consumption Expenditures (PCE) Price Index, a measure of inflation favored by the Federal Reserve, rose 0.2% in July and was up 3.7% from a year ago. Excluding food and energy, the PCE Price Index increased 0.2% in July and 3.3% over the last 12 months. Also, personal income rose 0.4% last month, while disposable (after-tax) income increased 0.5%. Personal consumption expenditures, a measure of consumer spending, increased 0.2% last month. 

Eye on the Week Ahead 

The employment data for August is available this week. July saw payrolls decrease by an estimated 23,000.