Market Insights

Historic volatility hit the stock market last week, but attention could soon turn to a series of upcoming catalysts. Some of them may be viewed positively — especially after last week’s big recovery.

The S&P 500 was down as much as 4.3 percent the morning of Monday, August 5. But it clawed back to end the week almost flat.

At least three factors made the big swing possible. First, August is typically a volatile month. Second, big moves in the Japanese yen hurt risk appetite. Third, there was little news to inform sentiment. However that will soon change as some big events approach.

Here are some known or expected catalysts that could impact the market as soon as this week:

• Inflation reports tomorrow and Wednesday. The less-important producer price index (PPI) comes first, followed by the more-important consumer price index (CPI). Both are at 8:30 a.m. ET.
• Retail sales and jobless claims are at the same time on Thursday morning. Those could be especially important for investors worried about the economy and a potential recession.
• Jerome Powell at Jackson Hole: The Federal Reserve chair could speak on Friday, August 23. (The schedule hasn’t been released, but he has typically spoken on Fridays of the annual conference.)
• Nvidia (NVDA) reports earnings after the closing bell on Wednesday, August 28.
• New iPhone? Apple (AAPL) is widely expected to release a new iPhone with AI capabilities in the first half of September. For example, Forbes reported AAPL will announce by September 5 that it will schedule the event around September 10.
• Fed rate cut on September 18? Financial markets unanimously expect the overnight rate to drop at least 25 basis points.

Better News Ahead?

It’s impossible to know how these events will unfold. Still, they will probably refocus attention on two major narratives in the stock market this year: rate cuts and AI. For example, the last three CPI reports have been lower than expected and Fed officials including Powell have recently made dovish comments.

For AI, AAPL was a late-comer to the boom, but jumped to new record highs after embracing the technology in June. That’s spurring hopes that millions of customers will upgrade their iPhones to support AI. NVDA has already doubled this year on strong demand for its Hopper chips. The market is now gearing up for Blackwell, a more power-efficient processor specially designed for AI.

NVDA has stumbled on reports the new product could be delayed. However, Microsoft (MSFT), Amazon.com (AMZN) and Meta Platforms (META) have increased planned capital expenditures on AI. That could support demand for NVDA chips.

Those upcoming events could be important because AAPL is the biggest company in the S&P 500 and NVDA is No. 3.

Major Comeback

Last week saw a major drop in the stock market, followed by an equally significant recovery.

If the S&P 500 had stayed down 4.3 percent, it would have been the index’s worst week in almost two years. Its subsequent 225-point bounce was the biggest recovery since the bull run began in November, according to TradeStation data.

Cboe’s volatility index (VIX) more than tripled, passing 60 for the first time since the coronavirus pandemic. But it stalled and ended the week about 3 points lower.

Some chart watchers may view that reversal as a sign of calm returning after a period of fear. Other big drops in the VIX were followed by gains in the broader market. Potential examples include last November, March 2023, October 2022 and November 2020.

The index held some potentially important levels, as well. It first bounced around 5120, near weekly closing levels from early March. It next returned above and tested the May 31 low of 5192.

Interestingly, last Monday’s low was 9.7 percent below the all-time high in mid-July — close to the formal definition of a “correction.” Could that mean the pullback has gone far enough?

The Nasdaq-100 fought back above its August 2 close on Friday afternoon, giving the tech-heavy index its first positive week in the last five. It also touched its 200-day moving average for the first time since March 2023, which may suggest a longer-term trend remains in effect.

Sentiment dropped sharply, according to the American Association of Individual Investors’ recurring poll. The proportion of “bearish” respondents jumped by 12.25 percentage points, the biggest increase since November 2022. That may be considered a bullish contrary indicator that selling pressures have already been unleashed.

Super Micro’s Selloff

Some of last week’s big moves resulted from quarterly reports. AI server maker Super Micro Computer (SMCI) beat estimates and issued strong revenue guidance. However it fell on weak margin guidance. (That’s potentially positive for the broader AI space because it suggests overall volumes are surging.)

Warner Bros. Discovery (WBD) had its biggest weekly drop in almost two years after earnings and revenue missed estimates. Management cited deterioration in traditional TV advertising.

Axon (AXON), the maker of Taser stun guns, surged to a new record high after earnings and revenue beat estimates.

Cybersecurity provider Fortinet (FTNT) also jumped on strong quarterly results.

Kellanova (K), part of the old Kellogg, surged on reports of a potential takeover. K has snack and prepared-food brands like Pop Tarts and Cheez It. The cereals are now owned by WK Kellogg (KLG).

The Week Ahead

Coming sessions include a few noteworthy items, aside from the events mentioned above. Housing, in particular, may be active later in the week.

Nothing is scheduled for today.

The PPI inflation report is on Tuesday, along with a speech by Fed policymaker Raphael Bostic.

The bigger CPI inflation report is on Wednesday morning, followed by crude-oil inventories. Cisco Systems (CSCO) reports earnings.

Thursday features retail sales, jobless claims and NAHB’s homebuilder sentiment index. Walmart (WMT), Applied Materials (AMAT) and Deere (DE) issue quarterly results.

Housing starts, building permits and consumer sentiment are due on Friday morning.