Stocks are edging lower ahead of Powell’s keynote address to the Jackson Hole symposium Friday amid a “coin flip” bet on Fed rate hikes heading into September.
U.S. equity futures edged lower Friday, while the dollar held steady against its global peers and Treasury bond yields held steady, as investors braced for what could be further interest rate hike signaling from Federal Reserve Chairman Jerome Powell later in the session.
Powell’s keynote address to the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming is expected to begin at 10:00 am Eastern time, with markets now expecting the Fed Chair to echo recent comments from his colleagues in cementing the case for continued rate hikes in order to ensure that inflation pressures don’t become embedded into the world’s biggest economy.
Esther George, the Kansas City Fed President, as well as her opposite numbers in Philadelphia and Atlanta, have effectively said this week that the Fed Funds rate, which currently sits in a range of 2.25% to 2.5%, will need to rise notably over the coming months, and remain at restrictive levels, in order to be effective.
Bets on another 75 basis point move next month in Washington are holding at around 62.5%, according to the CME Group’s FedWatch, but with PCE price index data due today, a fresh jobs report next week and August CPI data after that, Fed officials will have plenty of information to sift through before their September 21 decision.
Atlanta Fed President Raphael Bostic told the Wall Street Journal yesterday that “at this point, I’d toss a coin between” opting for a 50 basis point or a 75 basis point hike.
The core PCE Price Index, a measure of inflation that is designed to adapt to changes in consumer habits and the availability of goods, is likely to show further slowing in core price pressures when the data is released at 8:30 am Eastern time, although recent gains in both non-farm payrolls and average hourly earnings are likely to boost personal incomes and spending.
“Powell can make no promises today,” said Ian Shepherdson of Pantheon Macroeconomics of the Fed Chair’s address in Jackson Hole. “But we expect he will say that the path of rates is now data-dependent, which we would take to mean that if the August CPI and PPI number are decent, and the wages data are no stronger than in July, the Fed can pivot to a 50 basis point hike next month.”
Stocks Edge Lower, Jackson Hole, Dell, Gap And Marvell Technology In Focus – Five Things To Know
Heading into today’s speech, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.13% lower at 108.333 while rate-sensitive 2-year Treasury note yields eased to 3.380.%.
Stock investors, however, could be prepping for faster rate hikes, with Bank of America’s ‘Flow Show’ report indicating the biggest weekly fund outflow from tech stocks in November of last year, paired with the biggest move into the financial sector since January.
In overseas markets, Europe’s Stoxx 600 was marked 0.38% lower following a weakened reading for consumer confidence out of German, the region’s largest economy, following on from 0.5% overnight gain for the region-wide MSCI ex-Japan index in Asia.
On Wall Street, futures tied to the S&P 500 are indicating an 11 point opening bell decline while those liked to the Dow Jones Industrial Average are priced for a 50 point move to the downside. Futures linked to the tech-focused Nasdaq are indicating a 50 point dip.
In terms of individual stocks, Dell Technologies (DELL) – Get Dell Technologies Inc. Class C Report shares slumped lower after the PC and laptop maker posted stronger-than-expected second quarter earnings but cautioned that weakening business and consumer demand would clip near-term sales.
Gap Inc. (GPS) – Get Gap Inc. (The) Report shares moved firmly higher following a surprise second quarter profit that offset a muted near-term outlook linked to bulging inventories and softer clothing demand.
Marvell Technology (MRVL) – Get Marvell Technology Inc. Report shares, meanwhile, fell 3.5% after the chipmaker posted modestly firmer-than-expected second quarter earnings but cautioned that supply chain disruptions would continue to pressure near-term sales.
