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Meanwhile, a second report suggests that U.S. business activity remains deeply divided. According to preliminary data from S&P Global Market Intelligence, growth in the services sector is accelerating. But the country’s manufacturing sector appears to be contracting at a sharper rate.
Overall, the data suggests that the US economy is still growing, but it does point to some fragility.
“Growth has become increasingly dependent on the services sector, as manufacturing, which often drives the economic cycle, has declined,” said Chris Williamson, chief trade economist at S&P Global Market Intelligence.
The Federal Reserve cut its key interest rate to its highest level in more than two decades in hopes of reining in the economy enough to quell inflation but not enough to trigger a recession. With inflation slowing, the Fed is widely expected to cut rates at its next meeting in September, which would be the first easing since the Covid-19 crash in 2020.
That’s why all the attention is on Jackson Hole, Wyoming, where Powell will speak on Friday at an economic symposium that has been home to big policy announcements from the Fed in the past. The hope is that Powell will offer clues about how quickly and deeply the Fed might cut interest rates to ease economic conditions.
One risk is that expectations of future cuts are overblown among investors, which has happened repeatedly in history. That could make the decline in Treasury yields since the spring seem overblown. The decline helped lower mortgage rates, which in turn helped halt sales of previously owned homes from falling for four months in July.
Meanwhile, U.S. companies continue to report mostly better-than-expected earnings during the spring.
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Shares of online exercise company Peloton surged 35.4% after it beat sales expectations and lost less money in the fourth quarter than analysts had expected. The company posted modest revenue growth for the first time in more than two years.
Shares of Zoom Video Communications Inc., another company that benefited from the pandemic but whose fortunes have since slumped, surged after its earnings report. It surged 13 percent after reporting better-than-expected results and revenue for the fourth quarter.
But more stocks fell on Wall Street than rose, including Nvidia, which had been the heaviest weight in the S&P 500. The stock gave up early gains to fall 3.7% ahead of a highly anticipated earnings report due next week.
The company was briefly the driving force behind the S&P 500’s rally earlier in the day, but its shares have been tumbling sharply over the past month amid concerns that its price is overheating amid the AI frenzy. Even with Thursday’s loss, Nvidia’s stock is still up 150 percent so far this year.
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