Fed Policy and Market Sentiment in Focus as Jackson Hole Symposium Begins
As central bankers converge on Jackson Hole, Wyoming, all eyes are on Fed Chair Jerome Powell’s upcoming speech this Friday. Investors are eager for any clues regarding the Federal Reserve’s next moves on monetary policy. With recent signs of weakening in the U.S. job market, speculation is growing that the Fed may soon cut interest rates, possibly as early as September.
At the last Federal Reserve meeting in late July, the U.S. central bank opted to keep rates steady, maintaining the benchmark overnight interest rate between 5.25% and 5.50%. However, the minutes from that meeting reveal that the majority of participants believe it may soon be appropriate to ease policy if economic data continues to align with expectations.
Minneapolis Fed President Neel Kashkari recently remarked that the balance of risks has shifted, making the debate over a potential rate cut next month a pertinent discussion. Market participants are now pricing in a 38% probability of a 50 basis point cut at the Fed’s September 17-18 meeting, up from 33% just a day earlier. There’s also a 62% chance of a 25 basis point reduction, according to the CME Group’s FedWatch Tool.
However, as noted by Deutsche Bank analysts, Powell’s comments at Jackson Hole might not pre-commit to a specific trajectory, given that the Fed’s decisions remain data-dependent. Nonetheless, a strong case for a September cut is expected, especially with concerns over potential downside risks to the labor market.
Futures Hold Steady as Markets Await Labor Data and Powell’s Speech
U.S. stock futures traded cautiously on Thursday, reflecting investor wariness ahead of key labor market data and Powell’s address at the Jackson Hole symposium. As of early morning, Dow futures were up slightly by 46 points, while S&P 500 and Nasdaq 100 futures remained flat.
This comes after a modest rally in the major Wall Street indices on Wednesday, supported by the release of the July Fed meeting minutes. These minutes reinforced the view that a rate cut is likely in mid-September if the economic data remains on track.
In the corporate sector, attention will be on companies like Intuit and Ross Stores as they release their quarterly earnings. Meanwhile, Snowflake and Urban Outfitters saw significant stock drops after reporting disappointing results.
Payrolls Data and Economic Indicators Could Sway Fed Decisions
On Thursday, investors will be keenly watching the release of the weekly jobless claims and other economic data. The latest report is expected to show a slight increase in unemployment claims, which would support the case for a rate cut.
This follows a major revision by the Labor Department on Wednesday, revealing that the U.S. economy created 818,000 fewer jobs than previously reported in the year through March 2024. The downward revision—the largest since 2009—has heightened fears of a weakening labor market, which could spur the Fed to act sooner rather than later.
Additional economic data, including the S&P Global PMIs for August, will also be closely scrutinized. The manufacturing sector is expected to remain in contraction, with any signs of broader economic weakness likely reinforcing the case for a rate cut.
As analysts at Citi noted, the July FOMC minutes indicated a clear tilt towards policy easing, even before the weaker employment data was factored in. This sentiment suggests that the Fed may consider a more aggressive rate cut if economic conditions deteriorate further.
Oil Prices Under Pressure Amid Global Demand Concerns
In the commodities market, crude prices continued their downward trend on Thursday, driven by ongoing concerns over global demand. Both U.S. crude futures and Brent contracts saw slight declines, extending a losing streak that began with weak economic data from China and the U.S.
Despite a sharp drop in U.S. fuel inventories, which typically signals healthy demand, market sentiment remains subdued. The recent revisions to U.S. employment data have added to fears of a broader economic slowdown, which could further dampen demand for crude in the coming months.
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Today I expect more of the same melt up but any tone change from Fed Speakers and this will drop quick so be ready and stay stacking! See you in chat with more news and upgrades/downgrades!
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