Market Awaits Powell’s Jackson Hole Speech for Clues on Fed’s Next Move
On Friday, all eyes will be on Wyoming’s Grand Teton National Park as Federal Reserve Chair Jerome Powell delivers a pivotal speech at the annual Jackson Hole symposium. This event is expected to significantly influence market perceptions of future monetary policy and the state of the U.S. economy.
With recent signs of weakening economic data, the Federal Reserve may have the green light to cut interest rates, fueling expectations of a rate cut at the upcoming September meeting. The minutes from the Fed’s July meeting revealed that a “vast majority” of policymakers agreed that policy easing is likely to start next month. Powell’s speech is expected to focus less on setting the stage for rate cuts and more on evaluating the current economic conditions ahead of this anticipated move.
Concerns over a rapidly cooling labor market have heightened fears of a significant economic slowdown in the U.S., tempering risk appetite among investors this week. According to Goldman Sachs, Powell’s remarks are likely to underscore the Fed’s data-dependent and cautious approach to rate cuts. The investment bank anticipates that Powell will express the Fed’s readiness to act swiftly should economic conditions worsen, while avoiding any commitments to aggressive easing without further evidence.
Analysts at Goldman Sachs also suggest that while the symposium’s academic discussions may influence long-term policy direction, side interviews will likely provide more immediate insights into upcoming policy decisions.
Stock Futures Rise Ahead of Key Fed Speech
U.S. stock futures ticked higher on Friday as investors prepared for Jerome Powell’s critical speech at the Jackson Hole symposium, which could signal the beginning of a rate-cutting cycle by the central bank. By 04:05 ET (08:05 GMT), Dow futures were up 105 points (0.3%), S&P 500 futures increased by 23 points (0.4%), and Nasdaq 100 futures gained 120 points (0.6%).
This uptick follows a downturn on Thursday when major Wall Street indices fell sharply due to a surge in Treasury yields. The S&P 500 dropped 0.9%, the Nasdaq Composite fell 1.7%, and the Dow Jones Industrial Average decreased by nearly 180 points (0.4%).
Despite Thursday’s losses, the DJIA and S&P 500 have seen modest gains this week, buoyed by optimism that the Fed may soon ease monetary policy. Investors are also keeping an eye on economic data releases, including the latest figures on building permits and new home sales for July, while awaiting Powell’s comments on future interest rate strategies.
In corporate news, Uber (NYSE
) has announced a multiyear partnership with Cruise, a subsidiary of General Motors (NYSE
), to integrate self-driving vehicles into Uber’s ride-hailing platform. Meanwhile, Ross Stores (NASDAQ
) saw a significant premarket boost after raising its fiscal 2024 profit forecast and posting better-than-expected second-quarter results.
Global Central Bankers Navigate Policy Amid Economic Uncertainty
While Jerome Powell’s speech is in the spotlight, other central bankers are also making key policy decisions amid ongoing economic uncertainty. Earlier Friday, Bank of Japan (BOJ) Governor Kazuo Ueda reaffirmed his intention to raise interest rates, although he cautioned that financial markets remain unstable.
“Japan’s short-term rates are very low. If the economy is in good shape, they will move up to levels deemed neutral,” Ueda stated. However, he noted “very high uncertainty on where rates will eventually rise to.”
The BOJ moved away from its decade-long ultra-easy monetary policies in March by ending negative interest rates and raising its short-term policy rate to 0.25% in July. Meanwhile, the European Central Bank (ECB) maintained its interest rates last month after starting a rate-cutting cycle in June, shifting attention to its upcoming September meeting.
ECB policymakers, like Martins Kazaks, Latvia’s central bank governor, suggest there is room for up to two more rate cuts this year as inflation trends downward. Kazaks indicated that he would decide on September’s rate cut after reviewing August inflation figures and the ECB’s new projections.
Crude Prices Face Downward Pressure Amid Demand Concerns
Crude prices edged higher on Friday, but remained on track for substantial weekly losses due to persistent concerns over declining demand. As of 04:05 ET, U.S. crude futures (WTI) climbed 0.5% to $73.39 per barrel, while Brent crude rose 0.5% to $77.62 per barrel.
Despite the slight recovery, both benchmarks hit their lowest levels since early January this week, with Brent down around 3% and WTI nearly 5% lower so far this week. Recent data from China, the world’s largest oil importer, indicated a sluggish economy and reduced demand from refiners, while a sharp downward revision in U.S. employment data has increased fears of a potential hard landing for the U.S. economy, the largest energy consumer.
Efforts to broker a ceasefire in Gaza between Israel and Hamas, with U.S. and Israeli delegations meeting in Cairo, have also contributed to easing supply concerns and weighed on oil prices. Additionally, fears of an oil supply glut loom large as U.S. oil production recently hit a record high of over 13 million barrels earlier this month, and OPEC+ plans to increase output later this year.
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