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Good morning! As if we’d forget, the market keeps reminding us that it has good days and bad days.

Today, we’re unpacking this week’s wild swings, how the Fed ties in, and what comes next.

Buckle up.

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Swoons and swings

Investors have basked in tranquil markets for most of 2024, but that’s come to an abrupt end in August.

Wild trading goes in both directions though, which has made this week all the more interesting.

The stock market’s worst and best days of the year occurred with just two trading sessions between them.  

Remember, at the start of this week pundits and economists were calling on the Fed to initiate an emergency rate cut to help quell recession fears and placate market jitters.

And it wasn’t for nothing — this is what Monday looked like:

• The S&P 500 saw its largest single-day drop since September 2022

• The Dow lost 1,000 points

• The VIX volatility index hit a reading of 60, which has only happened during the 2008 crisis and the 2020 pandemic

Jarring as the day was, all of that together does not stack up to previous times the Fed has made an emergency policy move. 

“Pullbacks are not emergencies,” said Liz Young Thomas, SoFi’s head of investment strategy.

“Volatility is not an emergency…the only market-related circumstances that would call for an emergency rate cut are severe dislocations that prevent the market from functioning properly, thus threatening the stability of the financial system.”

Fast-forward to Thursday, and the Labor Department reported that initial jobless claims hit 233,000 for the week ending August 3, cooler than estimates for 240,000. 

That ignited a fresh everything-rally: 

• The S&P 500 notched its best single-day gain since November 2022

• The Dow added 683 points

• The VIX tumbled 15% to a still-elevated reading of 23

“Can we say that today’s number has quelled the looming recession fears? Absolutely not,” said Interactive Brokers’ chief strategist Steve Sosnick.

“Can we say that stock traders remain fixated on buying dips and chasing rallies? Absolutely yes.”

Since Monday’s sell-off — which rippled across Asia, Australia, and Europe — a handful of signals have been clawing back to pre-Monday form, as DataTrek Research co-founders Jessica Rabe and Nicholas Colas pointed out in a note Thursday.

Among them, the Japanese yen is weakening from its recent spike, 2-year Treasury yields have climbed back toward 4% from about 3.7%, and crude oil prices have surged roughly 5%. 

At an individual level, these could be promising components for steady markets.

But the broader macro picture, in DataTrek’s view, suggests otherwise.

“Nothing about the data points above inspires near-term confidence in US equities,” Rabe and Colas said. “We continue to believe that volatility will remain elevated.”

Comments or feedback? Hit reply to this email or let me know on X @philrosenn.

Elsewhere:

📈 Nvidia stock jumped 6% to lead chip stocks higher on Thursday. That rally was a welcome sight for a company that has seen more than $750 billion in market cap wiped out since June. Concerns remain that the AI trade may indeed be a bubble, and Nvidia has shed 25% since its recent peak. (Yahoo Finance)

🌎️ Paramount Global will cut 15% of its staff. That means a reduction of about 2,000 jobs, and it’s part of a broader cost-cutting plan in preparation for a merger with Skydance Media. Paramount also reported an unexpected profit for its streaming division in the quarter. The stock traded higher after hours. (CNBC)

🇺🇸 Trump says the president should influence the Fed. At a press conference at Mar-a-Lago, Trump said the central bank has “gotten it wrong a lot” and that he clashed with Jerome Powell during his time in the White House: “I think that, in my case, I made a lot of money. I was very successful and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman.” (WSJ)

Rapid-fire:

• Walgreens stock ticked higher as it sold $750 million in high-yield bonds Thursday, meeting stronger than expected demand (Bloomberg)

• Mortgage rates have fallen to a 15-month low (CBS)

• Wharton’s Jeremy Siegel backed off his calls for the Fed to make an emergency rate cut (CNBC)

• The Japanese yen carry trade still threatens markets as it unwinds around the world (FT)

• Boeing’s new CEO, Robert “Kelly “ Ortberg, began his tenure Thursday with the aim of revamping the company’s tattered image (CNBC)

Last thing:

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